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8/2/2019 Linking Local Government Discretion and Accountability in Decentralisation
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Development Policy Review, 2010, 28 (3): 259-293
The Authors 2010. Journal compilation 2010 Overseas Development Institute.
Published by Blackwell Publishing, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Linking Local Government Discretion andAccountability in DecentralisationSerdar Yilmaz, Yakup Beris and Rodrigo Serrano-Berthet
Decentralisation offers significant opportunities to improve governmentaccountability by exerting stronger pressures both from below (demand)and above (supply). The literature contains many examples, however,where the potential has not been realised, partly because decentralisationreforms have often been introduced without thinking through theiraccountability implications. Even when accountability is taken intoaccount, the efforts tend to emphasise either the supply or the demand side
of the equation, but not both. Drawing on the sets of literature on fiscal,administrative and political decentralisation, this article presents amethodology for studying this.
Key words:Decentralisation, local governance, accountability
1 The local governance challenge: linking discretion andaccountabilityEstablished theories in economics and political science have articulated the efficiencyand accountability gains that could accrue from decentralisation reforms.
1They include
the internalisation of spillover effects (Oates, 1972; Mueller, 1996), the alleviation of
information asymmetry and better accountability due to the proximity of principals and
agents (Cremer et al., 1996; Raff and Wilson, 1997; Bucovetsky et al., 1998) and
competition among local governments (Tiebout, 1956). Nevertheless, the empirical
literature is full of examples of failures or mixed results in delivering these gains
(Asthana, 2003; Akin et al., 2005). Part of the reason and the starting point of this
article is that both the theory and practice of decentralisation have suffered from a
partial and fragmented approach, undermining the comprehensive and strategic
sequencing required for effective decentralisation reforms. We argue here that toincrease the developmental impact of decentralisation to receive the biggest
development bang for the buck it is essential to get the right local governance
framework, balancing discretion and accountability.
Respectively, Social Development Department, World Bank, 1818 H Street, NW, Washington, DC 20433
([email protected]); United Nations Development Program; and World Bank. The findings and
conclusions are entirely those of the authors, and do not represent the views of the World Bank, its
executive directors, or the countries they represent.
1. In this article we use the term decentralisation to refer to devolution central governments transfer of
administrative and financial decision-making authority to local governments that have clear and legally
recognised jurisdictions within which they provide public services to constituents to whom they are
accountable and not deconcentration and delegation.
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260 Serdar Yilmaz, Yakup Beris and Rodrigo Serrano-Berthet
The Authors 2010. Journal compilation 2010 Overseas Development Institute.
Development Policy Review 28 (3)
Although decentralisation reforms have been at the centre of public-sector reforms
around the world, they come in different types political, administrative, fiscal and
forms deconcentration, delegation, devolution in each country. Furthermore,
implementation of these reforms is always partial, based on the political context of a
country; any illustration is therefore selective and incomplete.
As decentralisation reforms become more widespread across the world,2
they often
try to increase the autonomy and discretion of local governments without thinking
through the accountability incentive structures that are crucial to obtain more responsive
and accountable governments. Even when accountability is taken into account, the
efforts tend to emphasise only internal governmental mechanisms, neglecting external
citizen vigilance and political oversight, or vice versa. In addition, the relationship
between discretion and accountability in decentralisation reforms is further complicated
when fiscal, administrative, and political aspects are separated a point often missed in
such reform efforts.
If the practice of decentralisation has been fragmented and incomplete, it is, to a
certain extent, because of the separate and parallel pathways that its political and fiscal
theories have followed. Public-finance economists have emphasised the allocative
efficiency gains produced by fiscal decentralisation, downplaying the importance of the
political dynamics surrounding the capture of those benefits by local elites. Political
scientists have highlighted the potential for democratic deepening and citizen oversight,
overlooking the fiscal underpinnings required to make local governments work. This
article is part of an ongoing attempt to bring these two strands closer together.
The first-generation theory of fiscal federalism made the case for decentralised
fiscal choice based on its superior allocative efficiency. In his work on the theory of
public finance, Musgrave (1959) argued that the policies of subnational branches ofgovernments should be permitted to differ in order to reflect the preferences of
residents. Carrying Musgraves arguments further, Oates (1972: 87) formulated the
decentralisation theorem as each public service should be provided by the jurisdiction
having control over a minimum geographic area that would internalise benefits and
costs of such provision. One of the shortcomings of first-generation theory was that it
largely assumed that local public officials seek the common good. The more empirical
literatures from political science and political economy prove this to be wrong,
highlighting in particular the problem of capture by the local elite.
An emerging second-generation theory of fiscal federalism is bridging the gap
between the economic and political approaches to decentralisation, taking as its point ofdeparture the assumption that participants in political processes (both voters and
officials) have their own objective functions that they seek to maximise in a political
2. In 1994, Dillinger reported that of the 75 developing countries with populations greater than 5 million, all
but 12 claimed to have embarked on some form of transfer of power from central to local governments.
Since then this transfer has been occurring even in inherently centralised countries, such as Jordan
(World Bank, 2002), Morocco (Vaillancourt, 1998), Egypt (UNDP, 2004), Yemen (UNCDF, 2007), the
Peoples Republic of China (Wong, 1997), Turkey (Tosun and Yilmaz, 2010), and Central and Eastern
European countries (Dunn and Wetzel, 2000; Bird et al., 1995) as well as authoritarian regimes likeAngola (Felicio and Yilmaz, 2009), Burkina Faso (World Bank, 2009), Ethiopia (Yilmaz and Venugopal,
2008) and Pakistan (World Bank, 2009).
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setting that provides the constraints on their behaviour. Officials dont simply act on
behalf of the welfares of their constituents (Oates, 2005: 356).
Decentralisation reforms often lead to tensions among various stakeholders, not
surprisingly because decentralisation is about redistribution of power within and
between levels of government, with different actors having conflicting interests
(Hiskey, 2006). Analysing the political-economy drivers of these reforms is a crucial
element of implementing a coherent, well-thought-out decentralisation strategy. Often
decentralisation reforms are poorly designed and implemented, due to the lack of
understanding of the power and accountability relationship among various actors. The
political-economy approach highlights the influence of politics in framing and
implementing the reforms, showing that decentralisation is ultimately a highly political
process since it seeks to redistribute resources within the territorial confines of a given
nation-state (Agrawal et al., 1999: 2) and that the advantage of decentralisation is
compromised by capture by the local elites (Seabright, 1996; Bardhan and Mookherjee,
1998).
This article adds to this new more integrative body of literature by presenting a
methodology to better analyse the linkages between local discretion and accountability
in three dimensions: political, administrative, and fiscal. It argues that the relationship
between local discretion and accountability is far more complex than accountability
being an automatic outcome of increased discretion. In fact, increasing resources
allocated for public services and expanding local government discretion over the use of
these resources require a special attention to fixing accountability incentive structures.
Otherwise, decentralisation efforts will most likely not translate into more accountable
government.
Furthermore, all these relationships between discretion and accountability (brokendown into the supply and demand side
3of fiscal, administrative, and political aspects)
are far from being static. In all its aspects, decentralisation reshapes power relations
among the local residents, local governments, producers of local government services,
and higher levels of government (including central government). It sets new rules of the
3. The supply side of accountability, which is also known as public accountability, is the hallmark of and a
sine qua non for good governance (Bovens, 2005). It is the obligation of public authorities (governments,
elected representatives, corporate, and other governing bodies) to explain publicly, fully and fairly, how
they are conducting responsibilities that affect the public in important ways. Public accountability refers to
the institutionalised practice of account giving; it focuses on public-sector managers who spend publicmoney, exercise public authority, and manage a corporate body under public law. Until recently, efforts to
foster good governance focused on strengthening the supply side of accountability within state institutions.
Accordingly, donor initiatives supported institution-building in developing countries to increase thesupply
of governance processes by reforming public institutions. Recently, the development community has
concluded that domestic demandfor accountability, originating within civil-society entities and the public
at large, is at least as important for development as supply-side mechanisms. Also referred to as social
accountability, the demand side refers to an approach to building accountability that relies on civic
engagement in which ordinary citizens and/or civil-society organisations demand accountability.
Recognising the limitations of both electoral and public accountability mechanisms, demand-side/social-
accountability approaches require concerted civic education efforts during the decentralisation reform
process. This new understanding encouraged an expansion in the repertoire of instruments through which
citizens can hold the state to account, beyond voting. These instruments include traditional practices suchas public demonstrations, protests, and investigative journalism, as well as more innovative ones such as
participatory budgeting, social audits, or citizen report cards.
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The Authors 2010. Journal compilation 2010 Overseas Development Institute.
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political game, helping new local leaders to emerge in the political competition. It thus
redefines the interactions between local leaders and their constituencies. Similarly, as a
result of new regulatory and financial powers over procurement and service delivery,
the decisions and actions of local governments have a greater impact on local
economies. Decentralisation thus leads to new interactions and contractual relationships
between local governments, between small and big private firms, and between providers
and producers of services and communities and non-governmental organisations.
The methodology presented here is not intended as a one-size-fits-all solution to
the complex public policy issue of decentralisation. We are aware of the risk of
generalising issues that are mostly specific to the local context; thus, our aim is not to
offer a universal prescription. However, in the analysis we do not distinguish among
different types of local governments, i.e. urban vs. rural, small vs. big, or among
provinces in a federal system vs. local governments in a unitary system. We argue that
factors presented in the methodology that affect discretion and accountability are valid,
regardless of the size or location of the local governments. This is not to suggest that the
size and location of the local governments do not matter in a decentralisation context.4
They are relevant during the decision-making process on what kind of discretion over
which services should be accorded to local governments. However, the issues of
optimal size and location of local governments are beyond the scope of this article. Our
methodology recommends that, once a decision on according a certain level of
discretion is made, balancing discretion and accountability is important to increase the
developmental impact of decentralisation.
In balancing discretion and accountability, the relationship between the central
government or its deconcentrated units and local governments presents challenges.
Central governments or their deconcentrated units may set the rules under which localgovernments operate, and provide a portion of the local governments financial
resources for service delivery. In these cases, local governments are accountable to
higher-level hierarchies for their conduct. This often creates a relationship of upward
accountability or dependence on central authorities, which may contradict the
arguments about local discretion and accountability. While warning against these risks,
the goal here is not to dismiss the important role of central governments in
accountability relationships in decentralisation. Provided with a meaningful level of
discretionary space, local governments need to be checked and balanced against abuse
of their discretions. In this respect, central governments have a set of accountability
instruments. However, such formal accountability rules and norms can be too vague andincomplete to deal with every situation and circumstance. They also tend to favour
upward accountability towards upper levels of government. In these situations, there
is a need for a minimum level of rule of law that will allow local governments to
challenge central government encroachment (Bahl and Martinez-Vazquez, 2006). Such
4. The size or the nature of local government (urban vs. rural) should be resolved in the discussion over the
kind of expenditure assignments to be allocated to local governments, taking into account efficiency and
effectiveness factors and the demands of local populations. Studies about the size of local governments
examine the efficiency implications of size in service delivery. According to this literature, smallergovernments that are closer to the people should be better able to provide the tax/service delivery package
that citizens want (Fox and Gurley, 2006).
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minimum guarantees will allow independent bodies (such as courts) to arbitrate between
the central and local governments in case of conflict or disagreement.5
Although we accept the general notion of sequencing6
in decentralisation reforms,
we regard it as essential to conduct systematic analyses of country-specific local power
structures, interests, and socio-economic conditions to decide the best sequence for a
country. Beyond the elements of our methodology, any analysis of local governance
structures needs to pay particular attention to the way local governments (both
appointed and elected local officials) establish and maintain accountability relationships
with their surrounding local actors. Accordingly, the methodology put forward here is
simply a diagnostic tool for policy-makers to use when deciding on policy actions, not a
panacea. Following this introduction, Section 2 presents the key components of the
local political setting and discusses how to make local politics more accountable.
Section 3 introduces different dimensions of local administrative discretion and
accountability, and Section 4 discusses the linkage between discretion and
accountability in fiscal decentralisation. The final section puts forward possible
scenarios (trajectories) to achieve a high level of discretion and accountability in
decentralisation.
2 The local political setting and accountabilityAnalysing the local political setting is crucial to understanding the factors that drive
accountability (Lankina, 2008).7
Decentralisation reforms can restructure the local
political setting, reshaping local actor and voter incentives in many ways, such as
changing the size of municipalities, reformulating local electoral legislation, and
redefining formal relationships between the representative and executive bodies
(Keating, 1995). They can also change the structure of legislative bodies, the balance
5. This was the case when the Supreme Court of the Philippines ruled that the central government had to pay
the entitlements it was withholding from the local governments (Bahl and Martinez-Vazquez, 2006).
6. Sequencing in this particular context refers only to some preconditions for a successful decentralisation
reform. However, there is a broader debate on sequencing. The theoretical literature provides normative
discussions on broad steps for sequencing and implementing decentralisation programmes. But this is
limited to discretion (devolution of power) and is not linked to accountability. From our perspective,sequencing poses a big question: Can any one of three dimensions of decentralisation (political,
administrative, or fiscal) survive without the presence of the others? This is especially the case when
countries introduce only fiscal decentralisation without the other dimensions (for example, China and Viet
Nam). This article tries to partially address the sequencing issue in the last section under the discussion on
trajectories but refrains from making conclusive statements as it treats these cases as incomplete
decentralisation. The methodology does not present one or the other dimension as superior or conditional
for the other dimensions. But it presents different scenarios (trajectories) to reach the ultimate goal of a
high level of discretion and accountability in all three dimensions. The decision on how and whether to
reach this ultimate goal is a political one shaped by the local conditions and preferences in each country.
Our methodology presents a menu of options and possible trajectories. It would be too prescriptive if it
were to suggest a preference in these key and mostly political decisions.
7. The premise that the local political and institutional setting might substantially affect local performanceand accountability is extensively theorised and documented in institutionalism-inspired studies of
decentralisation (Lankina et al., 2007).
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between elected local authorities and local executives and administrators,8
the way
councils are elected, the way executives are elected or appointed, and the structures for
local legislative and executive bodies to relate to citizens (Lankina, 2008).
The following sub-sections identify the key structural elements at the local level
that define the setting for political action and set out some accompanying arrangements
needed to improve the downward accountability relationships of local authorities with
the citizens.
2.1 Factors defining the local political setting
An appropriate political setting for downward accountability requires a suitable
environment for local elected leaders to act independently (even if it conflicts with their
own parties or with the central government) and responsively (in line with the demands
of the local population). The local leadership will be influenced by at least three sets of
factors: (i) the institutional arrangements for separation of powers among the executive,
legislative, and judicial bodies; (ii) the election laws and the electoral system; and (iii)
the existence and functioning of a party system and political party laws.
Institutional separation of powers at the local level
Strongly influencing the quality of local decision-making are the checks and balances
between the executive, legislative, and judicial branches of local government and the
clear separation of powers among them. With roles and functions clearly identified,
local councillors are expected to undertake independent oversight over local executive
bodies, and local courts take the role of impartially resolving conflicts arising from localgovernments administrative actions. Accordingly, a key prerequisite for the separation
of powers, at least in theory, is a specialised local court system able to resolve such
conflicts. In many countries, this is done through administrative courts or alternative
dispute-resolution mechanisms that mediate between local governments and citizens
about administrative actions, such as land use, zoning, and business regulations.9
Another important component of the institutional separation of powers is the
relationship between the executive and the legislative. The relationship between and the
relative weight of the local executive and the local council establish how local decisions
8. We make a distinction between the elected and executive bodies within local governments because theyhave distinct roles in local decision-making. Schroeder (2004) depicts local governments (elected and
executive bodies) as the provision units rather than producers of services, meaning that they make
decisions about the type, quantity, and quality of services to be made available in the locality, how those
services are to be financed, and how produced. He ascribes the production of services to local public
employees, private contractors, or higher jurisdictions under contract with the local government. In this
sense, bureaucracy (and its supporting personnel) is the set of actors that either carry out the production of
local services or help to oversee the private (or public) contractors that serve as production units
(Schroeder 2004: 9). We use the term local appointed official interchangeably with local bureaucracy
and emphasise the important role of local elected representatives in local accountability systems,
especially in the oversight of local governments.
9. However, in less developed countries such formalised court systems usually do not extend to jurisdictions
below a certain level of government or do not always respond to certain types of small-scale conflicts.Frequently, traditional and informal structures may also address cases resulting from local government
actions, before a formal recourse to the judicial system.
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are made. Different institutional mechanisms for assigning the weight to the respective
bodies are possible:
Strong mayor system. Under the mayor-council set-up, also called a strong mayor
system, a popularly elected mayor wields strong executive, often charismatic,
authority, deciding public policy and with a strong symbolic role in representing the city
(Sisk, 2001).10
This arrangement is detrimental to local accountability if local councils
are marginalised and their role reduced to rubber-stamping the preferences of the local
executive (Lankina, 2008). In Cte dIvoire and Uganda, for example, use of the strong
mayor system has led to mayoral domination of local councils (Crook and Manor, 1998;
Wunsch, 2001).
Strong council. The second type of institutional arrangement is the election of a
mayor by the council, usually from council members, giving the council more weight
than the executive. This system is also referred to as parliamentary system. The risk of
this type of local government is that debating chambers are not able to implement
sound policy decisions (Lankina, 2008).
Council-manager. The third type, frequent under many strong council systems, is
the council-manager arrangement. The council appoints and contracts with a politically
neutral administrator to run and manage the city. Such an arrangement can preclude
politically motivated patronage (Montjoy and Watson, 1995).11
Commissioner. Under a commission form of municipal government, elected
commissioners also manage separate departments. They are both legislators and
department chairs, all with equal powers though one may have the title of mayor. The
system has been criticised for violating the principle of division of powers (Montjoy and
Watson, 1995).
Existence and quality of local electoral systems
Electoral systems change the incentives of elected local leaders and voters, during and
between elections.12
An electoral system may favour big parties, undermine alternative
10. Various arrangements exist for governing the mayor-council relationship. For example, the mayor may
have charter-based veto authority over council decisions, and procedures may exist for the council to
override this veto. Or the mayor may lack veto power. Mayor-council set-ups might have an adverse effect
on policy outcomes because political and administrative roles are not sharply distinguished under thisarrangement. Empirical studies have shown how electoral turnover, particularly when a new mayor defeats
an incumbent, results in proclivities for greater public expenditures and policy changes (Wolman et al.,
1996).
11. It has been suggested that city managers are more likely to pursue policy innovations than elected mayors
because they are ostensibly guided more by actual effectiveness and efficiency, rather than short-term
electoral considerations and pressure-group demands, which would have been the case with elected
political executives (Montjoy and Watson, 1995). City managers are not subject to frequent turnover and
thus are more likely to ensure policy continuity and to have credible commitments to other actors in local
development (Clingermayer and Feiock, 1997).
12. The concept of electoral systems is defined narrowly to refer only to the rules that determine the means
by which votes are translated into seats in the process of electing politicians into office (Farrell, 2001:
15). Electoral laws is a broader concept that includes the laws regulating all facets of the electionprocess, including nomination procedures, the characteristics of the franchise, and how campaigns are
conducted (ibid.).
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voices and dissent, or encourage strict hierarchies within parties.13
More important, it
can be structured in such a way as to systematically exclude certain groups. Or it may
encourage political parties to simply win the votes of particular groups over others. In
sum, the structure of local electoral systems has an impact on the quality of local
representation and its responsiveness, and therefore the performance of decentralisation
reforms (Hiskey, 2006).
Scholars of decentralisation assert that fair, competitive and regular elections
compel local politicians to exercise power in a way that allows decentralised institutions
to provide efficient and fair outcomes (Echeverri-Gent, 1993; Crook and Manor, 1998;
Blair, 2000; Faguet, 2008). But if an electoral system does not secure real competition
among local politicians, decentralisation reforms might end up strengthening the hands
of local political strongmen. Competition among local politicians increases the chances
for vulnerable groups to be included in decision-making (Lankina, 2008). However, few
scholars provide systematic insight into whether certain electoral arrangements produce
better outcomes than others (Packel, 2008). A host of factors may shape the
effectiveness of elections as an instrument of local citizens voice. Key among them:
whether elections are based on individuals or party-nominated candidates; whether
officials being elected are perceived to wield sufficient power; whether local elections
are held concomitantly with national elections; and, of course, whether elections are
manipulated (Sisk, 2001).
In this context, the choice between proportional representation and election
through single-member districts and plurality votes, also known as first-past-the-post, is
a key institutional variation. In the emerging systems of democratic decentralisation in
the developing world, there is more variation, ranging from pure PR systems, systems
mixing PR with elections from single-member districts, first-past-the-post elections insingle-member districts, to arrangements where the winning party takes all the council
seats allocated through the election (Packel, 2008).
In PR systems, voters generally vote for a political party rather than a specific
candidate. Electoral districts contain multiple representatives, and the share of votes
received by a party is translated by a fixed formula into the number of seats to be held
by that party. So PR works to ensure that a partys degree of representation
appropriately reflects its electoral support (ibid.).
The alternative to PR systems is majority or plurality voting within single-member
districts. Here, voters in a given electoral district vote for a specific candidate. With
only one representative per electoral district, voters have greater clarity ofrepresentation they have no doubt who is directly charged with accounting for their
interests. The chief drawback is that there is no guarantee that minority interests receive
any representation (ibid.). This arrangement becomes a particular concern where
minority interests are equally distributed across the polity. A party or group that has
only a slight minority could easily lose elections in each electoral district, leaving it
with no representation whatsoever (Farrell, 2001; Gallagher and Mitchell, 2005).
There are very few systematic studies evaluating the relationship between varying
institutional electoral arrangements and accountability in local governments (Packel,
13. Rules for candidacy may force party members to have closer ties with the centre rather than their local
constituency.
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2008). This is true for both advanced industrial democracies and developing countries.
It is therefore very important to develop this research agenda further to better
understand how the quality of local electoral systems reflects the local electorates
preferences, the nature of local campaigning and the performance of elected leaders.
Nature of party system and structures
The rules and structures of local political representation create (positive or negative)
incentives for local elected leaders to be downwardly accountable to all citizens.
Political parties lie at the heart of this representation. They articulate and aggregate
interests, provide channels for the recruitment of leadership, adjudicate disputes
between conflicting interests, and engage in government decision-making. They provide
the linkage between the ruler and the ruled, the policy-maker and the citizen (Lawson,
1980). Given the critical importance for local governance, it is essential to understand
the features affecting the party system and structures, namely, the existence of partisanor non-partisan systems, the role of national parties in nominating local candidates,
rules governing the financing of parties and the participation of disadvantaged groups
such as women or certain minorities, and the availability of parties based on ethnicity or
religion.
Partisan or non-partisan. Although a growing literature is looking at the
relationship between electoral competition and local government performance, a smaller
literature focuses on partisan systems compared with non-partisan ones (Packel, 2008).
Advocates of non-partisanship in local elections maintain that local government pertains
to bread and butter issues, on which there can be no division along party lines (Olowu,
2003). According to this understanding, the inclusion of parties at the local level risksallowing policy-making to become contaminated by patronage and clientelism instead
of focusing on long-term benefits (Packel, 2008). The literature argues that elected
officials may be focused on securing re-election or delivering benefits to their narrow
client base, rather than delivering policies that benefit the entire community in the long
run (Lankina, 2008). In addition, officials may be more concerned with taking measures
to ensure their promotion and advancement within the internal party structure, rather
than in promoting policies that benefit the community (Ahmad et al., 2005). In Ghana,
for example, parties have been outlawed in local elections, based on an argument that
merit, not party affiliation, is the basis of representation (Crook, 1999; Francis and
James, 2003). Indias panchayats also operate on a non-partisan basis by law(Venugopal and Yilmaz, 2009).
Allowing parties to participate in local government, by contrast, acknowledges the
link between local and national government. Examples of systems allowing partisanship
in local elections are nearly all from the recently decentralising Latin American
countries, including Bolivia and Mexico. In Africa, prominent examples of party-based
systems are Cte dIvoire, Kenya, Nigeria, Senegal and South Africa (Packel, 2008).
Role of national parties in nominating local candidates. The membership and
loyalty structure of the parties, the role of national party leaders in selecting candidates
and preparing party lists for local elections, and the hierarchy structure within parties
can also shape the behaviours of political parties. These factors can have direct orindirect effects on the ability of local political leaders to exercise their powers and may
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create an environment where national priorities and national party leaders dominate
local priorities and agendas.
In many countries, parties do not command stable loyalties, with elections
focusing on elites or personalities (Azfar et al., 2001). A review of relevant case studies
shows that national parties play a role in nominations (Packel, 2008), which may affect
party loyalties. Where local elections occur on a partisan basis, nomination rules that
favour national parties can serve as impediments to downward accountability. This is
the case in Senegal, where only nationally registered parties can field candidates for
local elections. In a study comparing six Latin American countries that have taken
formal measures to decentralise forest management, Larson (2003) notes with concern
that in Bolivia, Brazil, Costa Rica, Honduras and Nicaragua, local candidates are
selected by national parties. These arrangements are also likely to diminish the capacity
of local actors to demand accountability from local elected officials, because their
choices for selecting representatives are likely to be limited (Packel, 2008).
Financing of parties. Local party financing is also critical in analysing local governance
structures. Corrupt practices related to covert party funding streams, influence peddling,
and leveraging state resources for party purposes may compromise the faith of ordinary
citizens in the political processes. A recent study by the National Democratic Institute
of 22 countries highlights many areas of concern, such as the role of wealthy business
interests in funding campaigns to gain access to lucrative state contracts (Bryan and
Baer, 2005). This is still an area with a scant literature. In many developing countries,
accurate information about party funding sources and political spending practices is not
available to the public.
Participation of disadvantaged groups. Without clear rules stipulating the inclusion of
certain disadvantaged or minority segments of society, a party system may easily engender asystem of dominance by majority and more powerful social groups. Exclusion from the party
system based on race, gender, ethnicity, or religion reflects a party agenda (and inevitably, a
local council and government agenda) favouring the majority and the more powerful. In the
absence of sanctions against such exclusion, downward accountability of locally elected
leaders is damaged, leading to skewed policy-making and greater rent-seeking.
All the elements discussed in this section define the local political setting in which
local elected officials interact with the other actors within the government and with the
citizens. There is no one-size-fits-all setting that these elements would produce; many
different combinations could be determined, depending on the country context and
preferences of the local leaders. No matter what combination is chosen, however, thegoal is to provide a setting conducive to downward accountability. The following
section discusses the key aspects that need to be taken into account.
2.2 Making local politics downwardly accountable
Political accountability is a process whereby citizens hold elected officials to account
for their behaviour and performance say, through elections (Aucoin and Heintzman,
2000). Political accountability can also be improved by having elected local officials
oversee local executives, or by involving citizens directly in decision-making beyond
elections.
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Strengthening the political dimension of local accountability requires some
safeguards on the supply side regarding local electoral systems and local council
oversight (public accountability). On the demand side, political accountability measures
allow for citizen-initiated legislation (petitions), referenda, or recalls of elected public
officials, including procedures for petitions to adopt, amend, or repeal an act, law, or
executive order, to demand public hearings on policy decisions and action and to appeal
to ombudsman offices in local governments (social accountability).
Public accountability approaches
Introducing safeguards into the electoral system. Despite many weaknesses, elections
remain the principal method whereby all eligible local residents can have a voice in the
outcome and can hold decision-makers accountable (Schroeder, 2004: 9). They legitimise
local authority and provide elected representatives with a mandate for action. But little
attention has been devoted to how specific electoral mechanisms fare in deliveringaccountability, or even whether voters use elections to hold officials accountable for
certain policy decisions (Rodden, 2004). Nevertheless, the general literature on
elections does show that differing electoral arrangements shape how citizens exercise
influence on policy-makers (Powell, 2000).
An established body of literature on Western local governance suggests that, even
under perfect conditions, a voice in local elections fails to ensure that elected officials
will exercise power on behalf of all segments of the community.14
These studies suggest
structural biases against marginalised and non-elite groups built into elections even in
Western democracies. Hunter (1953) shows how power in US cities is concentrated in,
and exercised on behalf of, a narrow group of elite interests. Studies on the involvementof underprivileged segments in decision-making processes demonstrate that they
rubber-stamp decisions already reached by other interests (Schattschneider, 1960;
Bachrach and Baratz, 1962). And other studies reveal a middle-class, white-collar, male
bias in the composition of elected bodies (Balme, 1989; Newton, 1976; Mabileau, 1989;
Mabileau et al., 1989; Stone, 1989).
Some countries allow independent candidates to run in local elections, reserve
seats for women and other vulnerable groups, allow for recalls of elected officials and
limit the length of the term they may remain in office. These mechanisms are important
in countries where money, violence, and corruption dominate elections, and politics
are based on kin, personality, or patronage (Olowu et al., 2004: 71).The impact of such measures is complex. For example, re-election procedures
could determine political accountability, although two opposing relationships are
possible (Packel, 2008). Term limits could foster accountability by preventing local
politicians from becoming entrenched in their positions and locked into relationships of
patronage. Representatives who were recently private citizens would thus be more
14. As a result of a decline in faith in representative democracy, turnouts in local elections have gradually
declined over the past few decades in many countries. Elections focused on parties have likewise alienated
voters, as parties are often perceived to have lost touch with the electorate. In some countries, like Canada,
parties are now banned from participating in local elections; it is assumed that party-free elections ensurethat elected officials speak on behalf of the community and do not espouse narrow party agendas (Sisk,
2001).
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attuned to the concerns and interests of the community than career politicians (Packel,
2008). But if term limits are too restrictive, council members may not be able to master
the responsibilities of their position before their terms expire.
The theory of retrospective control of politicians asserts that, given perfect
information, voters use elections to reward or punish politicians. But without the
possibility of re-election, elections lose their power of control, and politicians may
engage in more rent-seeking (Maravall, 2007). Even with imperfect information,
eliminating the possibility of re-election may at the very least reduce opportunities for
accountability (Packel, 2008). Mexico is one country that imposes term limits of three
years on local elected officials and bars them from holding the same position again for
one term. Researchers argue that these limits impede performance (Cleary, 2007;
Grindle, 2006).
Recall gives councils or popular bodies the ability to dismiss elected leaders for
wrongdoing. Unlike elections, however, the decision is confined more to evaluations of
past actions. In Africa, recall provisions exist in Ethiopia and Nigeria (Olowu, 2003).
Indias panchayati raj law varies across different States, but some of the most
progressive legislation for recall exists in Madhya Pradesh, with detailed regulations for
gram panchayataction (Mathew and Mathew, 2003) and where thegram sabha (village
assembly open to all adult residents) has the right to dismiss the panchayat
chairperson in the event of wrongdoing (Johnson et al., 2005).
If a provision for recall exists, its design matters if it is to be an instrument of
accountability. Recall alone may not engender downward accountability if the only
actors capable of exercising this power are beholden to national political parties (Packel,
2008). In Bolivia, the widespread use of the law allowing the town council to recall
mayors in cases of misconduct, known as the voto constructivode censura (constructivecensorship vote), illustrates this risk. In 1997, one year after the first mayors entered
office following implementation of decentralising reforms, 30% of them were replaced,
indicating that the voto constructivo was being used as a political manoeuvre, not a
response to corruption (Hiskey and Seligson, 2003). Indeed, this high use demonstrated
that the recall hindered accountability, as mayors wound up being selected by council
members rather than by the electorate, and with less citizen support for the political
system than in municipalities where the recall was not exercised (ibid.).
Improving local council oversight. Local councils are the core units of
representative governments. Improving local council oversight therefore constitutes an
important part of public accountability approaches, relying as it does on the assumptionthat local elected representatives have more incentive to respond to the needs and
preferences of local populations and are more downwardly accountable than local
bureaucrats. The relationship between elected local councillors and executives also
pertains to budget planning, execution, and monitoring and evaluation. Local
councillors are supposed to oversee the executive branch during the entire process of
public financial management and provide local executives with constant feedback.
A number of factors interfere with the oversight responsibility of local councillors.
First, there is the status of local councillors (Lankina, 2008). Although executive
positions are generally considered to be full-time, in many settings councillors are low
paid and part-time, their council duties motivated by civic spirit and volunteerism(Pelissero and Krebs, 1997). Second, there is the lack of safeguards against dual
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structures of accountability (Lankina, 2008). In some developing countries, councillors
often occupy dual roles as full-time executive functionaries dependent on, and
accountable to, higher-up bureaucracies and elected local officials. In some parts of
Russia, local councils are packed with senior professional employees of medical and
educational institutions (Lankina, 2004). Such councillors are less likely to aggregate
and articulate the preferences of the citizens who elected them.15
Other countries demonstrate similar conflicts of interest. In Ghana, a third of local
councillors are formally appointed by state bodies, while in Kenya as well as Ghana,
members of parliament can be ex officio members of local councils (Olowu et al., 2004).
In India, some states have power to remove elected representatives or even dissolve
panchayats (Mathew and Mathew, 2003). In many countries, councillor positions also
overlap with key patrimonial, social, or other structures in the locality, impeding
accountability.
Social accountability approaches
Social accountability mechanisms can give poor and marginalised people a more direct
voice in the policies that local governments formulate and implement than through
elections and local councils. Studies of African countries where elections are in place
show that local citizens fail to sanction poorly performing officials effectively (Azfar et
al., 2001). Patronage, clientelism, elite capture and elite biases are still widespread.
Social accountability mechanisms are often part of broader efforts to deepen democracy
and ensure a robust public sphere for citizens to give feedback and control government
action.16
The practical form of such participatory arrangements includes public meetings,citizen juries, forums for various social groups, such as the young or the elderly,
neighbourhood assemblies, multi-choice referenda accompanied by active public debate
and discussion, and activism by non-governmental organisations and other community
groups. In some settings citizens are excused from work and asked to meet to make
recommendations about local issues, thus drawing even the normally passive and
uninterested citizens into public life (Lankina, 2008).17
Logistically, some of these
deliberative forums could be complicated and time-consuming, but observers point to
their merits, namely, that consensus-based decision-making may be more legitimate
than that of elected officials which cannot be realistically scrutinised on a daily basis
(Sisk, 2001).
15. In some instances, public employees, such as school principals, appointed by higher-level bureaucracies
on a contract basis, sit in local councils. They tend to satisfy the political preferences of regional
authorities because their jobs are subject to short-term contracts, which could be revoked. Even heads of
private enterprises are subject to control and manipulation by higher authorities because their tax
privileges and licences could be withdrawn at random (Lankina, 2004).
16. These efforts represent a new approach to democratic governance that some scholars have called
Empowered Participatory Governance (Fung, 2004). It looks at how alternative political and
administrative designs can surpass conventional democratic institutional forms on the quite practical aims
of enhancing the responsiveness and effectiveness of the state while making it more fair, participatory,
deliberative, and accountable (Fung and Wright, 2001: 8).17. The size of the locality and its cohesiveness are important factors determining the effectiveness of such
forums (Sisk, 2001).
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These powers to hold political leaders accountable may be expanded: (i) by
generic legislation empowering citizens to demand explanations and justifications from
local governments; (ii) by setting up specific bodies and processes for citizen oversight;
and (iii) by creating a political culture for citizen oversight.
Generic legislation. Some initiatives introduce legal mechanisms empowering
citizens to redress grievances or request explanations of municipal legislation. Public
hearings and consultations, the right to demand a public hearing, public petitions, and
the right to initiate a recall or referendum are examples.
Specific bodies and processes. These can comprise all citizens in the municipality
(gram sabha in India), several citizen representatives (Vigilance Committee in Bolivia),
or an elected position (citizen ombudsman in Japan). In some countries local
development programmes transfer discretionary resources to local governments on
condition that they create multi-stakeholder forums, with representation from civil
society, local councillors, and deconcentrated offices.18
In the Philippines, for example,
the Local Government Code mandates all provincial, municipal, and village
governments to establish local development councils to set the direction for economic
and social development and review local government budgets, one-quarter of the
members to come from non-governmental and community-based organisations (Estrella
and Iszatt, 2004).
Creating a political culture. By introducing mechanisms for poor and marginalised
people to participate in decision-making and for local transparency and accountability,
community-driven development programmes have promoted a culture of citizen
oversight.19
A community-based programme that empowers citizens to be informed and
have a say over local public expenditure creates the expectation that all programmes
should follow the same standards.
3 Local administrative discretion and accountabilityTo have flexibility in delivering services and the opportunity to respond to local needs,
local governments need administrative autonomy. We identify three broad areas of
authority as being crucial for local governments to be administratively autonomous:
power to make, change and enforce regulatory decisions/laws; to govern a procurement
system (based on national standards); and to make civil service/employment decisions.
18. Although these forums provide a venue for greater co-ordination and control, they need to be properly
designed to complement the role of the local council.
19. A community-driven development approach tries to improve the well-being of poor people by increasing
their control over the way investment resources are planned, executed and managed. Because communities
do not act in isolation but in a local space where they interact with local governments, sectoral service
delivery units, the private sector, and civil-society organisations, the community-driven approach hasrecently been expanded into a broader local governance approach that captures the quality of these local
interactions (Helling et al., 2005; McLean et al., 2006).
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3.1 Factors affecting local administrative discretion
Ability to regulate
As part of administrative autonomy, local governments need a minimum set of powersand capacities to initiate, amend and enforce regulatory legislation on issues within their
jurisdiction, subject to national and state laws. Their powers usually extend to local
economic development, land-use planning and management, zoning, and public safety
and in certain cases, some aspects of public health, social protection, education, and
environmental protection. These enhance their discretionary authority to make decisions
and take actions concerning who can benefit from given resources or opportunities,
how, and to what extent (Agrawal and Ribot, 1999: 480). For example, research on
environmental regulatory networks for shrimp farming in Thailand shows that local
governments are the most effective regulators (Vandergeest, 2007).
They also need the power to sanction and punish non-compliance, one such toolbeing the administrative penalty, usually a monetary fine or the revocation of licences
or rights related to, say, an economic activity or land use. Although the power to
sanction requires a qualified workforce to monitor non-compliance, endowing local
governments with such power could prove more practical and cost-effective than
prosecution through litigation.20
Discretion to procure and administer services
Expanded mandates and responsibilities for new services require local governments to
be given discretion over procurement processes for goods and services,21
which in turn
requires flexibility in procurement laws and regulations and high-quality employees
well trained in public procurement, ethics, and contract management (Brennan and
Miller, n. d.). Such discretion implies that, under strictly stipulated national standards
and regulations, local governments can develop procurement strategies,22
identify
associated processes, and issue contracts for goods and services.23
Discretion over civil service and employment policies
In many countries political and fiscal devolution may have proceeded apace, but
administrative changes may only approximate deconcentration, the result being
20. Administrative penalties do not replace criminal prosecution, and the legal system is important for local
administrative autonomy. Enforcing local administrative rulings is effective and legitimate only when
there is recourse to challenging local government decisions. As discussed in Section 2, the existence of a
specialised administrative court system for local affairs would be instrumental in establishing checks and
balances between local executive and legislative bodies.
21. Private-sector participation in service delivery through service and management contracts, leasing,
concessions and joint ventures alleviates pressures on budgets. It also brings in skills and knowledge,
improves the efficiency of service delivery and insulates operations from political interventions.
22. A procurement strategy should stipulate mechanisms for assuring compliance with the competitive bidding
and against abuses, such as bid splitting, change of orders, and restrictive bid specifications.
23. A local government procurement policy is closely associated with the quality of service administration andthe way contracts are awarded to partnerships in service delivery, including for firms of various sizes,
social enterprises, minority groups businesses, and voluntary and community organisation suppliers.
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weakened accountability for service delivery, and conflicts of interest (Ahmad et
al., 2005: 10). Civil servants form a crucial link in moving government closer to people;
therefore civil service management or more broadly human resource management
should be seen as an essential component in the design of decentralisation rather than a
separate, stand-alone process (Green, 2005: 129).
Local government competency and discretion over civil service and employment
policies ideally cover autonomy and transparency in pay policy (overall wage rates as
well as allowances), control of budget and establishment, autonomy in recruitment,
control of career management, and performance management (Evans, 2004: 24).24
The
degree of autonomy differs across countries; Table 1 provides a general picture of the
situation in East Asia.Each of these factors increases a local governments administrative autonomy and
influences its accountability relationship with local bureaucracies. However, many
countries suffer from misaligned structures of accountability in decentralisation
(Lankina, 2008). In Pakistan, for example, despite devolution of responsibility for
education to school districts, teachers remained provincial government employees, with
the elected district executive, nazim, having little authority over them (Ahmad et al.,
2005). Similarly in Uganda, despite devolution in health care, key decisions and drug
provision remain the prerogative of the centre, but salaries and staffing are that of the
District, undermining local incentives for efficiency and responsiveness (Azfar et al.,
2001).
Granting administrative autonomy to local governments in civil service
management results in reallocating powers and jobs, geographically and institutionally.
Issues related to status, prestige and labour mobility often impede relocation or
dislocation of civil servants across tiers of government. Bureaucracies tend to resistdecentralisation reforms because of career perspectives and institutional and political
allegiances. Such resistance can lead to field officers maintaining strong links with their
original line ministries, thereby enjoying some insulation against local control. This is
often the case in countries where central government officials were simply transferred to
local governments after decentralisation reforms were instituted. The result is that staff
burdens are transferred to local governments, without the discretionary powers over the
civil service. In India, for instance, though most State legislation has clarified the
functions to be devolved, the States have frequently been unable to transfer
administrative and technical and technical controls over locally administered
programmes. In China, on the other hand, although subnational employees make up90% of total government employment, the central government retains a significant
degree of control over numbers and wage levels, structure and career and performance
management of the subnational civil service (Green, 2005). Both in China and the
Philippines, the double subordination of local government staff to the local executive
and the relevant central agency weakens the downward accountability of local civil
servants (ibid.).
24. Some form of accountability to higher levels of authority may be unavoidable for local authorities
performing state-delegated or -funded tasks. It is, however, important that there be no confusion aboutresponsibilities or distorted incentive structures whereby the local authorities are deprived of leverage over
service providers within their jurisdictions.
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Table 1: Staffing authority among subnationalgovernments in East AsiaEnabling mechanisms
Cambodia
China
Indonesia
Philippines
Thailand
Vietnam
Budget control
Determine wage
Dismiss surplus staff
Establishment control
Control overall staffing
numbers
in individual offices
and facilities
Recruitment
Formal employer
Have authority to hire
Have independent
merit-based recruitment
mechanism
Career management
Promotion available
Internal transfers
possible
Horizontal mobility
Performance management
Direct and supervise
Conduct evaluations
Offer financial rewards
Discipline and fire
Pay policy
Set overall wage rates
Set local incentives/
top-ups
Note: = yes; = partial; = no. Ratings refer to the subnational level and de facto practices as well as de
jure authority. Data are for most recent available year, ranging from 2000 to 2003.
Source: Green (2005).
3.2 Making local administration downwardly accountable
Accountability for the exercise of administrative powers requires avenues for
complaints and redress, accessible to officials and others. Oversight of the use of civil
service control includes measures to improve budget transparency on staff payments, on
policies and practices for new appointments, and on practices for budget and
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establishment control. Similar measures are needed to ensure transparency and openness
of the procurement process to avoid misconduct and corruption. These measures call for
appropriate channels for administrative audits that can be initiated by bureaucrats or
elected leaders and by civil-society groups.
Public accountability approaches
Public accountability in the administrative sphere refers to local civil servants being
accountable to their top administrative officers and to outside officials or entities such
as public audit officers, ombudsmen, regulators, a particular administrative agency, or a
board or committee. Three major mechanisms that public sector approaches rely on to
improve this accountability are structures within bureaucratic hierarchies, specially
designed independent bodies, and administrative courts.
Accountability structures in the bureaucratic hierarchy enable higher authorities to
instigate investigations or audits of the use of administrative discretion by lowerbureaucrats, and are important as a first step to uncover information about
misadministration by local governments. Issues arising due to lack of sound control and
audit systems range from collusive practices in procurement in Indonesia (World Bank,
2003) to a lack of compliance with procurement laws in the Philippines (World Bank,
2004b).
Specially designed independent bodies authorised to conduct administrative audits
on local governments have emerged in response to increased complexities requiring
specific expertise, and have become a widespread accountability measure. Examples
include independent/external auditors who scrutinise the use of public funds,
ombudsmen who hear citizens complaints about regulations, decisions and actions,25
and theme-specific bodies (such as the anti-corruption commissions, environmental
review boards, or commissions for sustainable development) that analyse whether local
administrative decisions are in line with national sectoral strategies.26
Administrative courts with local expertise address local conflicts arising from local
governments regulatory and administrative decisions, and can ensure compliance with
national laws and regulations. Such a court system issues binding decisions and may
resolve cases that the local governments and associated independent bodies fail to
address. In France, for example, les tribunaux administratifs are the court of first
instance with full jurisdiction over disputes related to local government actions.
25. The office of the Ombudsman in the Indian State of Kerala is a 7-member body consisting of a High Court
judge as the chairperson, other judges and non-political representatives appointed after consultation with
opposition parties. In addition, there are appellate tribunals as a source of appeal against panchayat
decisions. Only impeachment could remove members of these bodies, which minimises the chance of
executive interference with their work (Mathew and Mathew, 2003).
26. Legislatures set up these agencies to make inquiries, obtain information, and issue (limited) regulations or
judgments (Zarei, 2000). In some African countries, like Ghana and Uganda, there are local judicial orconflict-resolving agencies, run by volunteers, which may be customary, providing sound redress for local
grievances (Olowu et al., 2004).
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Social accountability approaches
Public accountability approaches are necessary to provide channels for uncovering basic
information on regulatory decisions and civil service practices and services. But public
approaches alone fall short of ensuring proper use of administrative discretion. Citizen-based efforts concentrate on producing the information that is most relevant for local
citizens welfare monitoring the quality of services and the way contracts and tenders
are given at the local level. Recent approaches emphasise the need for citizens to initiate
administrative audits to reveal more information on employment and pay policies as
well as relationships between local governments and service providers.
Information provision as a basis for citizen monitoring. Lack of information on
financial allocations often leads to the abuse of funds; making information available to
the public is thus the starting point for many social accountability initiatives. In India,
social audit committees, comprising individuals with impeccable reputations, scrutinise
local decision-making and publicise findings on how public money is allocated andspent (Mathew and Mathew, 2003). In the State of Rajasthan, public hearings with wide
publicity and social mobilisation forced public officials to return public money they had
misallocated (ibid.).
Monitoring procurement and implementation. The contracting and implementation
of public works and services suffer from a high risk of corruption and mismanagement.
Citizen-based initiatives complement government accountability mechanisms that
manage these risks supervising contracting and bidding, monitoring construction, and
auditing budget execution.
A typical source of corruption and collusion involves drafting tender documents in
ways that unfairly benefit one contractor over others. Citizens have organised publicconsultations in which different parties get a chance to comment on draft tender
documents, and independent outsiders conduct an in-depth analysis before the start of
bidding. In the Philippines, the Local Government Code defines ways in which
accredited non-governmental and community-based organisations can have a seat on the
prequalification, bid, and award committee for local contracts. In Argentina, the
Municipality of Morn, assisted by the local chapter of Transparency International,
introduced two mechanisms to monitor the contracting of the waste collection service,
which had been widely criticised for alleged corruption. At an extraordinary session of
the city council, attended by 500 people, the value of the contract was reduced from
about $45 million to $32 million.Citizens have also been involved in overseeing the opening and analysis of bidding
offers, as with the Social Investment Fund in Nicaragua (Grun, 2000). They can also
oversee construction while it is taking place, and are trained to see that funds are spent
as allocated and that the construction follows the standards agreed to in the contract.
Monitoring local service provision. The level and quality of service provision are
probably what citizens care about most. Participatory assessments and feedback surveys
are often accompanied by agreements on the standards of services expected.
One of the main innovations that drew attention to the potential of the social
accountability approach was the citizen report cards in Bangalore, India (Paul, 2002).
The cards are participatory surveys that solicit user feedback on the performance ofpublic services. They are used in situations where there are no demand-side data, such
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as user perceptions of the quality and satisfaction with public services, and they gather
demand-side data about state-owned monopolies, many of which lack incentives to be
responsive. The report-card process relies on extensive media coverage and civil-society
advocacy to achieve greater accountability in other Indian States, Ghana, Malaysia,
Senegal and Uganda. In Uganda, a recent report-card project, aimed at reinforcing
health providers accountability to citizen-clients by enhancing communities ability to
monitor providers, increased the quality and quantity of primary health-care provision
(Bjorkman and Svensson, 2007).
Another example of social scrutiny of local governments is social funds
committees, user groups that ensure that services are delivered as intended.27
A
complement is the citizen charter, a pact between the community and service providers
that spells out expectations and roles, enabling citizens to interact more effectively with
the local authority. An example is the Citizens Charter of the Municipality of Mumbai,
India, which covers detailed public services for each municipal department. Other
strategies have relied on the creation of new multi-stakeholder institutions to promote
citizen oversight over a specific local government service. Examples include the local
school councils in Chicago in the United States (Fung, 2004) and citizen community
boards and school management committees in Pakistan (ADB/DFID/World Bank,
2004).
Citizen monitoring of administrative decisions should be seen as a complement
and not a substitute for public accountability mechanisms. Citizen-based actions may in
fact fail to provide effective oversight. Local citizens often lack the knowledge to assess
adequately the quality of complex services, which results in market imperfections in
the sense that they cannot properly hold local policy-makers accountable (Lankina,
2008). What voters can assess is often wasteful, but highly visible, projects, whoseimplementation also rewards narrow clients, not the broader citizenry (Ahmad et al.,
2005). This was the case in the Czech Republic, where one badly performing
municipality decided on a very costly but also highly visible bridge across the river
running through the city (Lankina et al., 2007). Similar caution is needed to judge the
quality of participation in community activities to monitor local government service
delivery. Even if participatory mechanisms are in place, which might boost a given
localitys overall economic development, the levels of participation within the
community are likely to be lower among those less economically advantaged and the
benefits of the new participatory arrangements biased toward those who are better-off
(Lankina, 2008). A study in Uganda found that education and income weredeterminants of membership in such key local government committees as health and
school management (Azfar et al., 2001).
27. The empirical record of these mechanisms is mixed, and there is no systematic evaluation of their
effectiveness (Olowu et al., 2004).
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4 Fiscal discretion and accountability28Local government performance is intrinsically linked to the scope and nature of
intergovernmental fiscal arrangements. If local governments are denied the fiscal
instruments and funding to make real use of their political and administrative autonomy,
decentralisation is doomed.29
Intergovernmental fiscal rules determine the expenditure
responsibilities and revenue resources of local governments as well as the design of the
transfers system and local governments access to capital markets (Bird, 2000).
4.1 Determinants of local fiscal discretion
Expenditure assignment
Devolving expenditure responsibilities to local governments is an important step in
increasing the participation of citizens in local decision-making.30
A genuine spirit ofdecentralisation requires assigning a meaningful level of expenditure responsibilities to
local governments with service autonomy so that they can respond to local needs. More
importantly, they need the discretion to make their own allocation decisions (with the
necessary reporting, monitoring and sanctioning).
In this devolving of responsibilities there should be no room for ambiguity. Clear
assignment of roles and responsibilities is decisive in shaping accountability
relationships. If the contest over service-delivery responsibilities is not resolved, it can
easily constrain local autonomy and reduce the local governments credibility and
responsiveness. A related issue is unfunded mandates imposed from above. These
reduce local budgetary autonomy, as was the case in East European countries as theyembarked on decentralisation in the early 1990s (Bird et al., 1995).
A clear assignment of service responsibilities requires a well-defined institutional
framework that describes the roles and responsibilities of different levels of government. Lack
of this is a common problem in East Asia. In Indonesia, for example, although the
decentralisation law of 1999 gave all authorities to local governments, since authorities are
broader than functions there is confusion about who is responsible for what, from legislation to
planning to implementation (Mountfield and Wong, 2005: 95). Clear assignment of
expenditure responsibilities becomes even more important in sectors where line ministries and
other government agencies may also deliver services at the local level often in the same
geographic area. This situation often exists for education, health, and social services in manydeveloping countries. In China and Vietnam, for example, the administrative system
28. There is a robust literature on the theoretical and implementation aspects of fiscal decentralisation the
intergovernmental framework (IGF). On the other hand, the interaction between IGF and the political and
administrative dimensions as well as fiscal discretion and accountability are inadequately studied. Thus,
this section does not provide an extensive review of IGF issues, but focuses on the linkage between IGF
and discretion and accountability.
29. Fiscal decentralisation requires public services with high local-public-good characteristics to be assigned to
local governments and the rearrangement of roles and responsibilities among different levels of government.
30. In countries where decentralisation does not end up transferring such responsibilities to local governments,central government departments and public-sector companies continue to deliver most services with high
local characteristics, such as primary education, health, and public security.
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operates as nested hierarchies, and this creates ambiguity about the distribution of
functions in a multi-tiered setting (Mountfield and Wong, 2005).
Revenue assignment
Oatess decentralisation theorem (1972) states that local governments should provide
services to identifiable recipients up to the point where the value placed on the last
(marginal) amount of services for which recipients are willing to pay is equal to the
benefits they receive. The implication is that local governments must be given the
authority to exercise own-source taxation to self-finance local services at the margin,
on the premise that local governments are more accountable when relying on their own
tax bases (Faguet, 2008), and would be less accountable when the pleasure of
expenditure benefits is separated from the pain of taxation (Bahl and Schroeder, 1983).
Significant revenue autonomy and some tax-effort incentives are critical to
encourage downward accountability and increase the efficiency of local governmentoperations.
31Although there is no set of prescribed rules in revenue assignment,
subnational governments should at least have rate-setting authority over locally
assigned revenues (Bahl, 1999a). A completely local tax is one that is assessed and
collected by local governments at rates decided by and with proceeds accruing to local
governments (Bird, 2000; Bird and Vaillancourt, 1998).
In many countries, the central government interferes with local revenue autonomy,
putting direct or indirect restrictions on local governments discretionary space. In
Uganda, local governments may impose additional taxes, but only with the approval of
the Ministry of Local Government; however, there are no standards established for
approval or rejection (Azfar et al., 2001). Restrictions on revenue generation are similarin the Philippines; the Local Government Code constrains local revenue collection
through rules on rates, assessments, appeals, and administrative responsibilities
(USAID, 1999). The accountability implication of each constraint is that they might
create incentives to make inefficient investment decisions, especially if costs can be
shifted to central budgets (Campos and Hellman, 2005: 242).
Financing the fiscal gap
The design of intergovernmental transfer systems has implications for accountability
because it affects the fiscal dependence on central government and local revenue-raising
ability. Four elements determine this dependence (Yilmaz and Bindebir, 2003): the rulesdetermining the total amount of transfer the distributable pool; the way the pool is
allocated among local governments; the purpose of the transfer system an
unconditional general purpose grant versus a conditional specific transfer; and the
design and management of the system.
A high degree of dependence on transfer revenues and a poorly designed system
shift the focus of local government accountability away from citizens to central
31. In some cases, local governments do not seek revenue-raising discretion to avoid accountability. In other
cases, they do not collect taxes assigned to them. In China, for example, local governments have takenback door approaches, for example, contracts with enterprises, tax holidays, tax administration, and
trades for investment in public services (Bahl, 1999b: 79).
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governments. In other words, they create an imbalance between downward and upward
accountability incentives at the local level, negatively affecting local government
discretion and the incentive to respond to citizen demands. In Nigeria, for example,
local governments over-dependence on intergovernmental transfer revenues, coupled
with uncertainty about the amount and timing, facilitates local evasion of responsibility
under the guise of fiscal powerlessness (Khemani, 2006: 22), while in Uganda, where
transfers, as earmarked conditional grants, finance more than 80% of local government
expenditures, a substantial degree of line ministry control over local expenditure
decisions is maintained.32
Financing infrastructure: local government borrowing
Local borrowing is the fourth pillar of the intergovernmental fiscal system. Access to
capital markets gives local governments an opportunity to finance local investment
needs. However, heavy reliance on borrowing has put macroeconomic stabilisation atrisk. In the late 1990s, in Argentina, for example, perversely structured
intergovernmental systems destabilised the economy.
In countries where central government cannot credibly commit to a hard budget
constraint, there are irresistible incentives for local governments to exploit borrowing
and extend their budgets beyond their means (Faguet, 2008). In Bra