Local government financing

Posted on 13/01/2015 by Ryan Schweitzer

Decentralization, or the strategic transfer of authority and responsibility for governance from higher to lower levels of government, has been occurring in many developing countries over the past few decades. In general terms the objective of decentralisation is to bring greater involvement of andaccountability to, the recipients of public services. Unfortunately in many cases, the transfer of administrative functions and political responsibility have been transferred to local government, however fiscal decentralization often does not keep pace. As a result local governments may struggle with insufficient resources, in both financial terms and also in terms of their human resource capacities. Experience has shown that the capacity of the local government to fulfil its role as service authorities, is crucial to the sustainability of public services in its jurisdiction.

Aguaconsult has been working with its clients to help local governments understand their financing needs. Examples of the work include the development of life cycle costs analysis tools to assist service providers and municipalities in Bolivia in collecting, analysing, and interpreting cost information, as well as information which can be used to improve asset management and link budgets to financial resources. Aguaconsult has also developed financial models to help private operators in Burkina Faso analyse their operating costs, calculate tariff, and develop capital investment plans. This financial model can also be used by local government to understand tax revenue flows, and the public financial liabilities under various contract arrangements with service providers.