PRESENTED TO THE INSTITUTE OF PROFESSIONAL FINANCIAL MANAGERS IN CONJUNCTION WITH ST. CLEMENTS UNIVERSITY IN FULFILMENT OF DOCTOR OF BUSINESS ADMINISTRATION
I, Maurice Alex Muhwezi-Murari, declare that to the best of my knowledge and belief, this thesis is my original work and has not been presented to any university for the award of a degree.
This dissertation has been submitted with my approval as the supervisor.
This work is dedicated to my wife Mrs. L. R. Martha Muhwezi and all my children, my parents, Mr. Yosamu Rutanga and the late Mrs. A. Joy Rutanga.
I am indebted to my family, particularly my dear wife, Martha for her love, patience and kindness and for tolerating my failure to perform most of the duties of a husband due to the commitment to my work. Thanks to my children, for whom I could not find enough time during the time of the study. I thank them very much for bearing with me.
I am grateful to my aging father, Mr. Yosamu Rutanga and late mother Mrs. A. Joy Rutanga who sacrificed whatever they had for my education during my formative age. Had it not been for their commitment to my education at that level, I would have no opportunity whatsoever to write this thesis.
I am grateful to my brothers: Professor Murindwa-Rutanga for his guidance, advice and encouragement throughout my academic life. Prof. Murindwa at a number of my academic life picked so many of my fee bills. I owe him so much for his priceless support. I thank Mr. Rwaganika Henry Nkurunungi for moral support; Mr. Robert Sabiiti, for giving me the necessary career guidance at most of the levels of my education; and Mr. James Akampumuza for his moral support towards my academics.
For a lot of moral support, I thank my uncle, Rev. Fr. Dr. Vincent Kanyonza, and my cousin Engineer Edward Turyomurugyendo.
I thank my brother-in-law, Mrs. Michael Kitutu for sparing his precious time to read and edit my work. Mr. Godfrey Nato Nyongesa assisted me in analysing my data using SPSS which was taking very long with me. Mr. Nato offered to come to my residence in Nairobi all the way from Nakuru (about 200 kilometres away) to work with me throughout a whole weekend. His support was indeed priceless. I thank Dr. Frederick Mugisha who constantly critiqued my work at every point begging from the proposal writing level to the end. His contribution to my understanding of issues was amazing. He spent a number of hours at my residence and his offices to help me shape my proposal and later on my thesis.
I thank so much John Musiime and Rogers for the good job of transcribing the data from the tapes to the computer. This took them two weeks and they had to shift from Kampala to Nairobi in Kenya to do this assignment. I owe them so much that I cannot attach a price to. I also thank Miss Tabitha Nabafu who did part of the transcribing of the data.
Mrs. Angeline Kinya Ogeto spent some time editing the thesis and gave very useful criticism. I thank her for that. Mr. Allen Chombo helped me in maintaining a consistent numbering of sections for which I thank him very much.
Lastly, I am heavily indebted to Mr. Frank Ntankovu for collecting the data. I also owe a lot to my respondents who exercised a lot of patience during the interview to answer all the questions. They were such a pleasant source of information. I would like to specifically mention Mr. Nad Ampumwize Kibatenga and Mr. Johnson Tusimireyo whom I continuously kept on calling and sending mail to cross check some unclear issues. They gave this information as and when asked quite urgently.
Figure 1: Local government (district) administrative structure 3
List of tables
Table 1: Administrative structures of Kabale district
A budget is a tool for management to express in figures its future intentions. It provides a yardstick by which individuals or groups can be measured and rewarded. It provides room for decentralisation of authority without losing information required for purposes of control. Budgets provide a mechanism to control in detail the revenue, costs, cash and capital expenditure. (Nugus, 1998, P 2).
Budgets must be managed and controlled. This is to ensure proper utilisation of the limited resources. Budgetary control is a system of controlling costs, which includes the preparation of budgets, co-ordinating the departments and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve optimum resource utilisation.
Uganda has been held in high esteem for her fast economic recovery. Since 1986, the government has undertaken a series of economic reforms focusing on fiscal and macro-economic issues. These fiscal reforms have led the government to streamline its budget, improving its revenue collections and prioritising expenditures. Certainly, such reforms are not easy in a country formerly characterised by civil, political and economic strife.
Uganda does its budgeting at different governance levels. There is the central level, which is by the central government, and the decentralised level, which is by the districts, which are devolved. Parallel to the decentralised level are semi-autonomous government institutions. The power to local governments to budget for their own budget emanates from the local government Act of 1997. The Act gives recognition to the devolution to the districts and municipalities. Therefore, the local governments prepare and present their own budgets to the central governments for funding. The local governments Act gives responsibilities and allowable sources of revenue to local governments. (Sections 78, 79 & 81).
Uganda was one of the first countries to develop a comprehensive poverty reduction strategy and was the first to qualify for Heavily Indebted Poor Countries (HIPC) debt relief. (Nannyonjo, 2001, Williamson, 2003, Evaluation of the Uganda Country Strategy 2000-2003).
Uganda pioneered sector approaches based on transparent collaboration with donors at all stages of planning, budgeting and implementation. Uganda’s ability to use aid effectively is based on a well-articulated system of public expenditure management.
It is argued that Uganda’s fiscal and budgetary discipline is linked
to systematic medium term planning and budgeting, which is guided by the
policies and objectives of the Poverty Eradication Action Plan (PEAP).
Service delivery is increasingly decentralised to local governments. The
Government created the Poverty Action Fund to channel debt relief to
poverty-focused expenditures, and this became an attractive channel for
donors seeking to disburse through the government budget. (Foster &
Mijumbi, 2001, Williamson, 2003, Nannyonjo, 2001)
On the other hand, pervasive corruption is acknowledged. (Evaluation of the Uganda Country Strategy 2000-2003) as a serious problem, and public procurement, accounting and audit are said to be weak. Revenue collection is also weak especially after the scraping of graduated tax in 2005. If these weaknesses existed, they might affect the effectiveness and efficiency in budgeting and budget execution management. This study was an attempt to trace/map out the budgeting process at the decentralised levels of governance, to identify challenges/bottlenecks/weaknesses and strengths with a view to building and improving on the strong points and identifying approaches/solutions to address the weaknesses.
Kabale district is made up of three counties as indicated in the
matrix below. These counties are made up of the sub counties indicated
in the same matrix. The population and the surface area are also
indicated accordingly. Each of the sub counties is made up of a number
of parishes. It is important for this study to underscore the fact that
if all the people or at least the majorities of the population were
fully involved in the budgeting process, more would be achieved.
Figure 1: Local government (district) administrative structure
Note: LC IV only exists where there is a designated municipality. In other words, it is a body corporate.
The budgeting is done at all the levels of government beginning with
the sub-county, which in the Political and Social arrangement of the
local government is referred to as LC3. It is a body corporate and a
budget centre. Then the Municipality (LC 4) is a budget centre as well
as the district (LC 5). At each of these levels, there are standing
Kabale district is one of the 70 districts in Uganda as shown in
Figure 1. The district is located in Western Uganda and is named after
its chief town.
Source: Lands and Survey Department, Entebbe, Uganda
Kabale district is shaded on the map of Uganda in figure 1. The district consists of the following three counties: Ndorwa, Rukiga and Rubanda. It also has Kabale Municipality, which is equivalent to a county. The municipality is at the same level as Counties. A county is an administrative unit within the district. It is composed of sub-counties. Whereas counties have sub-counties, the municipality has Divisions at the same administrative and political level. The divisions and sub-counties constitute the local council 3 (LC3). There are 19 LC3s in Kabale district including three divisions in the municipality. At the same time, there are 118 parishes (LC2s).
There are a number of sectors, which are a basis of budgeting. They
include finance and planning, management and support services; natural
resources; technical services and works. The others are production and
marketing; health, education, and community based services.
According to the local government Act, 1997, local councils (LC3) are body corporate. It can sue and or be sued. They are budgeting and accounting centres in their right. The contention of this study is that if all the people at the lowest level were fully involved in the budgeting process, enough data would be generated and the process more transparent.
However, for all the people to participate usefully in the budgeting
process, they need to be fully educated. They have to be educated on the
need for budgeting. They also need to be trained on how to budget.
Otherwise, they lose interest in the whole exercise.
In Uganda local government structures, budgeting is done at all levels. This begins from the sub-county (LC3) and municipal council (LC4) levels to the district level. The authority of the local governments to budget and spend is derived from the local government Act (1997 as amended). After the district level, the budgetary proposals are sent to the line ministries for inclusion in the Government budget prepared by the Ministry of Finance Planning and Economic Development.
Like most institutions, the different levels of the budgeting process follow the general budget cycle. The basic difference lies in the layers involved and how the vetting process occurs in the case of Uganda.
The conceptual framework in Figure 2 shows the links between the
Ministry of Finance, Ministry of local government and national planning
authority (NPA) at the national level, the district or local authority
and sub-county at the grass roots. The dotted lines show appropriation
and audits between the three levels while the arrows show the synergic
links between the three levels.
The key actors in the nation’s budget process are the cabinet, which reviews and endorses the budget proposal. The MFPED, which drafts the annual budget, the legislature (National parliament) approves the annual budget. Sector ministries and local governments execute the annual budget. The Auditor General on the other hand is responsible for auditing the expenditures made under each annual budget.
The Ministry of Finance and Economic Planning organises the first budget consultative conference for members of parliament, line ministries and local government officials, private sector and civil society members, donors and the media. This meeting generates economic policies for the next three-year period. It also sets up the Sector Working Groups (SWGs). Through ministerial consultations, a national budget framework is normally constituted and the national budget indicative planning figures are developed and released.
The Ministry of Finance also sends the budget call circular (BCC) to the various accounting officers. Through the BCC budget, proposals from the various budget centres are requested. Budget centres include districts, municipalities and line ministries.
It was therefore important to study how the indicative planning figures (IPFs) are generated, who the stakeholders involved in generation of these indicative planning figures are, and the expected contribution. It was also necessary to understand whether stakeholders actually contribute to the process and the challenges they face. For this study, it was deemed important to understand the contents of the budget call circular. It was also useful to establish the time of the year at which this is done. This was meant to help in gauging whether the time is enough to allow for other activities in between the BCC and the budget finalisation.
It was also necessary to establish the recipients of the budget call circular. The expectation of the receipts of the budget call circular also ought to be established. The study was also intended to establish whether there is always adequate response to the budget call circular from its recipients.
1.3.2 Budgeting at the district level
In Uganda, the process of government decentralization began in 1993 when the parliament enacted the local governments (Resistance Councils) statute. The statute provided for the transfer of functions, powers, and services from the central government to local governments. It also enabled district authorities to make decisions on the utilization of funds – decisions that were hitherto made by the central government.
Locally elected assemblies were created at the local government level, to ensure adequate reflection of local priorities in government programmes (local governments Act 1997, Section 11). Uganda currently has 80 districts that are governed by the local government Act of 1997. The districts have wide-ranging responsibilities for delivery of basic services in health, education, agriculture, and infrastructure. The government operates a system of conditional grants transfers to local governments, which are specifically targeted at each sector, in pursuit of the overall policies and objectives included in the PEAP.
Each district has a budget desk, which fine-tunes the budget proposals and a plenary council that approves them. It is the obligation of the district to enforce accountability as per the local government Act 1997 as amended. Each district also holds budget conferences at the beginning of the budgeting process. It was important to find out what the budget conference is.
The study also sought to establish what exactly is tabled for discussion at the conference. It was also necessary to understand who tables what is to be discussed as well as those who attend. It would be very helpful to know whether there are consultations to be made before the budget conference. Hence, for each category of the participants the study endeavoured to establish the expectations of the people who participate in the process. It also established how conversant they were with the budgeting process and whether the technical staff had a voice in the budget process.
1.3.3 Budgeting at the sub-county level
It was hoped that a number of budgeting issues would be clarified by the study including budgeting skill, sufficiency of resources for budgeting, availability of accurate data for budgeting, financial resource mobilisation skills in government and its organisations. It was also necessary to establish whether it was or was not possible for the government to detect negative tendencies in the budgeting process. Various personal or group interests also needed to be investigated. Interests at the political level such as benefiting specific areas might also affect the efficiency and effectiveness of the budgeting and budget execution process.
Every budget has its goals and objectives, which ought to be
understood by all the concerned people. Hence, it was critical to study
the clarity of the goals and objective policies of the government in
relation to budgeting and budget execution were during the period in
question. Shortage of the human resources also has the capacity to
impede the budgeting process and management of budget execution. It was
therefore important to find out whether the human resources to handle
the budgeting process effectively were available. The study also sought
to establish how possible misappropriation of resources and nepotism
might influence the budgeting process.
Many scholars (Van Horne, 2002, Cole 1996, Pandey, 1995) have attempted to define budget in the contexts of their studies. However, the common understanding is that it entails the allocation of funds to activities, projects and programmes of an organisation to meet its objectives in accordance with its resource envelope.
A budget is “a statement, usually expressed in financial terms, of the desired performance of an organisation in the pursuit of its objectives in the short-term. It is an action plan for the future, representing the operational and tactical end of the corporate planning chain.” (Cole 1996, p. 229)
“Budgeting is intended as a mechanism for setting goals and objectives, for measuring progress towards objectives, for identifying weaknesses or inadequacies in organisations and for controlling and integrating the diverse activities carried out by numerous sub units within large bureaucracies both public and private. Budgeting is the manifestation of an organisation’s strategies, whether set strategies are a result of thoughtful strategic planning processes, the inertia of long years of doing approximately the same thing, or of the competing political forces with in the organisation bargaining for shares of resources. Once resources are allocated through the budgeting process, the organisation strategies become apparent even if they have not been articulated as strategies” (Lee .J. and Johnson, p.2) (sic)
Uganda runs a very open and consultative budget process, where the government’s near and medium term strategy for implementing the Poverty Eradication Action Plan (PEAP) is discussed. Although the terminology may differ, all students of budgeting agree that budgeting is about allocating scarce resources among competing public demands in order to attain societal goals and objectives. They also agree in essence that budgeting sets out a financial plan of the organisation or government for the following year. The national budget process, which is led by the Ministry of Finance Planning and Economic Development (MFPED) runs from October to the reading of the budget in June. The process has several stakeholder conferences, with involvement from local governments, civil society and donors as well as central ministries and agencies (Williamson 2003, P.5. Unpublished).
The budget in the case of Uganda may be used as a tool of poverty reduction depending on how well it is used. However, this can only be achieved if the central administration is aligned with the decentralised areas. This calls for full involvement of the population at all levels of budgeting and budget management. (Policy framework paper 1999, 2000-2001, 02.)
2.2: Budget approval
In Uganda, legislative bodies exist at all levels beginning from local council 3 (LC 3). At the national level, parliament approves the budget. It is worthy noting that political, social and other interests influence the budgeting process at all levels. In other words, social economic and political diversity influence legislative behaviour.
“In early 1990’s, Uganda’s priority was to establish macroeconomic stability, which resulted in high inflation. A combination of strong leadership from a merged Ministry of Finance and Planning and the introduction of instruments including the medium term budget framework (MTBF) as a means to control aggregate public expenditure resulted in a reassertion of macroeconomic discipline. In 1995, the medium term expenditure framework (MTEF) started to be used as a tool for addressing the inter- and intra-sector composition of budget expenditures and expenditure out-turns. Throughout its development, the MTEF has been strongly linked to the budget process. Agencies were also encouraged to start planning and budgeting on sector-by-sector basis and from the mid 1990’s Sector Wide Approaches (SWAPs) were promoted as a means of improving strategic planning and implementation in the roads, education and health sectors. … Another key policy reform … has been the introduction of decentralisation through which the mandate for the delivery of basic government services was devolved to local governments.” (Roberts, 2003 p. 23)
To tackle these weaknesses, Government in the mid 1990s moved from a project driven approach to the development of a three-year MTEF. The purpose of the MTEF is to ensure that all expenditures accord with strategic budgetary priorities. At the same time, Government ensures that the resources made available for funding the MTEF are consistent with macroeconomic stability, particularly inflation control.
The MTEF has given the donors greater confidence in Uganda's capacity for budget management and encouraged them to channel a larger share of their aid to the Government in the form of budget support, as opposed to directly funding projects in parallel with the domestic budget. In the 1990s, budget support as a share of total donor aid to the Government averaged only 26%, whereas the share had risen to 52% by 2005/2006. (Uganda Case Study, 2004)
Before the funds are released, there is pre-auditing. Lee and Johnson (1998 p.50), while discussing pre-auditing, assert, “Before any expenditure is made, a form of pre-audit is used to ensure that funds are being committed for approved purposes and that an agency has sufficient credit in its budget to meet the proposed expenditure… Later after approval is granted and purchase is made the treasurer writes a cheque for expenditure.”
From the literature, one notes that in the case of Uganda the Auditor General (AG) reports directly to Parliament (Uganda constitution 1996 Article 163 (4). In the case of United States of America, the General Accounting Officer (GAO) carries out functions similar to the Auditor General (Lee & Johnson, 1998). It gives parliament opinions on legal issues such as advising on whether a particular agency acted in the law in some specific instances under consideration.
This indicates that Uganda has chosen to take the right path. What it needs however is continued political commitment. It also needs to involve as many civil society members as possible as well as the other members of the community.
The medium term budget framework (MTBF), the MTEF and the PAF are the
allocation mechanisms, whilst the budget is the actual instrument for
(the public sector aspects of) implementation of the PEAP. MFPED
estimates the available resources (donor and local) over the medium term
(3 years) using the medium term budget framework (MTBF) and gives budget
ceiling to sectors in October at a national budget conference in the
form of a draft MTEF. Administrative units structure the budget by
sector in the MTEF, which results in a quasi-programmatic MTEF. (Lee &
The above definitions do not differ from those given by the other writers. What is important however is the common understanding of a budget. They portray a budget as a financial plan. It indicates the planned activities as well as the amount of money that will be required to accomplish them. It also indicates how the money will be obtained. A budget is a management tool for gauging the level of achievement in relation to the expenditure. (Pandey, 1979) and Rukunga Ncebere (1999).
“Budgeting is intended as a mechanism for setting goals and objectives, for measuring progress towards objectives, for identifying weaknesses or inadequacies in organisations and for controlling and integrating the diverse activities carried out by numerous sub units within large bureaucracies both public and private. Budgeting is the manifesto of an organisation’s strategies, where the set strategies are a result of thoughtful strategic planning processes. … Once resources are allocated through the budgeting process, the organisation strategies become apparent even if they have not been articulated as strategies” ( Pandey, 1979, p 2).
For the budget to be a useful tool, it must put into consideration the subjects. Subjects in this case refer to the people it is meant to serve. In Uganda and other poor countries, a budget can only be useful if it is meant to address the needs of the poor. In such a case, it is regarded as a pro-poor budget.
Pro-poor budget “is at the level of budget composition that the relationship between budgets and poverty reduction is most apparent. The conventional wisdom is that poverty reduction is best served by shifting resources from other sectors, such as defence and general administration, towards the social sectors, especially primary education and primary health care, and towards certain types of infrastructure provision, such as rural roads and water supply”. “…it is widely believed that both corruption and difficulties in enforcing contracts retard growth and hence poverty reduction, but the fight to rectify these defects is likely to require increased spending on administration … and legal institutions such as courts. At the other extreme, little poverty impact is achieved by increasing the drug budget for the health system if corrupt employees illegally sold drugs routinely. Lee and Johnson also argue, “Since corruption in government involves finance budget offices sometimes have major responsibility for protecting the government against fraud wastes and abuses of government.” (Lee and Johnson, 1998, P. 270.)
Below is a pictorial interpretation of the budgeting cycle in Uganda nationwide.
Figure 4 Source: Adopted from Williamson, P. 4
In Uganda, since the determination of PEAP, the theme of the budget has been poverty eradication. The framework above indicates plans and strategies on one-hand and allocation instruments on the other. Plans and strategies include poverty eradication action plan, sector development plans and local government plans. Allocation instruments on the other hand include MTEF, NBFP, PAF, budget, national sector budget framework Paper (NSBFP) and sectoral budget, central agency performance plans and budget as well as PAF work plans and budgets.
The figure illustrates how the various instruments would lead to poverty eradication, which is the objective of the budget. It indicates a situation where the local government development plans lead to sector development plans and vice-versa. The L G D P on the other hand feed into PEAP.
The LGBFP, PAF and budget are the instruments that facilitate LGDP. Central agency performance plans and budget on the other hand lead to NSBFP and sector budget and vice-versa. These in turn lead to MTEF, NBFP, PAF and the Budget. This is expected to result into poverty eradication.
2.7 Influence of politics in budgeting
Politics influences the budget process in Uganda just like if does world over. Political considerations are critical in setting the agenda of the budgeting process. It is apparent that in developing budgets, political leaders are always mindful of programme initiatives leading to higher expenditures.
In the budgeting process, a series of concerns are considered. These include strategic and tactical concerns. With strategic concerns, the chief executive needs to convey to the units involved and especially the central budget office a sense of priorities so that effort is not needlessly wasted on proposals that they will reject. While with strategic concerns, the CEO conveys a tactical view. An assessment must be made of political reactions to any proposed tax increase or outs. Another set of consideration involves relations with the legislative body…. The CEO assesses the chances of various recommendations for approval. (Lee and Johnson, 1998)
The budgeting process starts when MFPED provides ceilings for all central grant allocations in November and holds a series of regional budget workshops. The local government then prepares budget framework papers mirroring the central government process. Local governments (LGs) review budget performance, project their available resources over the medium term, the plan and budget within those projections. Embedded in this is the identification and use of target to review performance and plan the future (Williamson 2003, P. 10).
Budgeting entails preparation of a budget framework paper that sets out government’s near and medium term strategies for implementing PEAP. Sector working groups (SWG) are charged with allocating the sector ceilings between agencies in the sector though the preparation of sector BFP submissions informs SWG reports. (Williamson, 2003, Roberts, 2003).
In practice, planning and budgeting decisions are largely concentrated at the district level although there is some involvement at the sub-county level. This translates into lack of knowledge of and or planned activities and set targets at the lower levels. District officials cite capacity constraints at lower levels to plan, the expense of participatory processes and conditional grants guidelines, which often concentrate decision making power at the district
Probably the biggest reason for this concentration of decision-making powers is the desire for the district level politicians and administration staff to make decisions rather than development responsibilities to lower levels.
Many factors influence the budgeting process at the local government level. District officials cite capacity constraints at lower levels to plan as one. They also site expense of participatory processes and conditional grants guidelines, which often concentrate decision-making power at the district as some of the other factors.
Probably the biggest reason for this concentration is the desire for the district level politicians and administrative staff to make decisions rather than devolvement of responsibilities to lower levels. It is possible that the politicians as well as the technocrats at the various local levels want to be recognised.
Thinking about the poor and poverty eradication ideas seriously contributes to the budget trends in Uganda at all levels. Poverty eradication became a prominent campaign in the early 2000s when the President personally came up to make his position clear about the various approaches to poverty eradication in the country. Since then, a number of programmes have emerged. These include SWAPs and PAF. The government has also made it difficult for any one to divert funds meant for these programmes by law.
These changes have been made possible by the huge increase in donor financing which is well about half of the public expenditure which has resulted into doubling of the fiscal deficit. Much of the original increases in the sector allocations were a direct result of the provision of donor budget support, which was earmarked to sectors and channelled through the governments, own budget. (Williamson, 2003)
Donors have been of great support to the Ugandan economy because of the strict fiduciary policies and practices the government has put in place. Donors have indeed come to assist the economy and the people of Uganda. For example, as Williamson notes “Donors, … through the HIPC arrangements, have been keen to redirect composition of spending towards ‘pro-poor’ activities, such as primary education and health care. This enthusiasm has often been accompanied by a desire to ring…” (Williamson 2003, P. 5)
The population should be happy and seek to continue to contribute to
the budgeting process for this important step.
Allocations for both recurrent and development conditional grants between local governments are either weighted according to sector service delivery, or the status of poverty out comes in the education and water sectors. Sector Ministries use the status of sector indicators a means of reducing the variations of service delivery levels between local governments. For example, a local government with a lower reported level of safe water coverage will receive a higher budget allocation than one with higher safe water coverage.
However, allocation based on the status of an out put/service level indicator actually creates perverse incentives which undermine rather than promote budget efficiency. For example, the more local governments receive higher grant allocations the worse the classroom pupil ratio is. If a local government wants to maximise future revenues, it is in its interest either to use the funds inefficiently or to understate the stock of classroom and overstate enrolment. This in essence means that donor-funding par se cannot generate change. Changes can only be generated from within because of self-realisation and a sense of ownership.
2.10 Budget estimation
What is evidently lacking in this argument is that there are varying interests at all these levels, which in most times are dependent on the prevailing circumstances.
“A budget framework paper is prepared during the budgeting process that sets out governments near and medium term strategies for implementing PEAP. Sector working groups (SWG) are charged with allocating the sector ceilings between agencies in the sector though the preparation of sector BFP submissions inform of SWG reports. SWGs are made up of central and local government, donor and civil society representatives. MFPED provides specific guidelines for SWGs, which are required to review past performance and propose medium term intra-sector budget allocations,” (Williamson, Op.cit P. 6.)
Allocations for both recurrent and development conditional grants between local governments are either weighted according to sector service delivery, or the status poverty out comes in the education and water sectors. Sector Ministries use the status of sector indicators as a means of reducing the variations of service delivery levels between local governments for example a local government with a lower reported level of safe water coverage will receive a higher budget allocation than one with a higher safe water coverage. Similarly, classroom construction allocations are based on the prevailing classroom pupil ratio in a local government. The intention is for the local governments in the lower status to allow worse off local governments to catch up reducing the disparity of sector outputs within the country.
In practice, planning and budgeting decisions are largely
concentrated at the district level, although there is some involvement
of sub counties, and this translates into a lack of knowledge, and/or
ownership of planned activities and set targets at lower levels.
District officials cite capacity constraints at lower levels to plan,
the expense of participatory processes and the conditional grant
guidelines, which often concentrate decision-making power at the
district. … probably the biggest reason for this concentration is the
desire for district level politicians and administration staff to make
decisions themselves rather than devolve responsibility to lower
levels”. (Bevan and Adam 2001, P. 39.)
The local government structure in Uganda provides opportunity for inclusive, participatory decision-making processes that in turn should provide opportunity for the strong ownership of objectives and targets. Planning meetings at each level of the local government, supported by various sector committees, should provide for full participation of lower local governments, politicians and civil society organisations in the identification of sector outputs and targets.
It is important to underscore the need for popular participation to
enhance transparency. To this end, Folscher and Krafchik (1999) in their
paper ‘Fiscal transparency and the budget’ referred to transparency as
the availability, breadth,' quality, timeliness and, usefulness of
information on fiscal issues, institutional processes and roles.
Uganda does not only provide a realistic portrayal of the status of demand and supply of services but also prompt creation of cost effective mechanisms of public accountability through, for example, information dissemination on resource allocation and use.
2.13 Challenges they face
It is very important for the PAF funds ‘to be tied’ because it would be otherwise be easy to divert it to other uses. It is therefore possible that lack of flexibility may to some extent affect activities, but in a situation where the demands for finances are ever unlimited, it is necessary to put some limitations on the extent to which resources can be utilised unchecked.
The grant is shared between different levels of local government. Lower local governments (sub counties and parishes) are given indicative planning figures and they identify specific investments to be carried on in the following financial year. In sub counties, work plans are pinned in the sub-county offices for every one to see what is meant to be done. It is therefore clear that attempts are made to institutionalise activity based planning at the lower levels.
Although the broad group of stakeholders in sector working groups are supposed to be responsible for preparing the reports, the majority of the work is carried out by planning departments in sector ministries supported by the sector budget officer in the ministry of finance. The sector working groups advise and agree on what is proposed, but efficiently hold real power in this process.
2.15 Donor and Non-governmental (NGO) funding
The use of donor project funds was prescriptive, however government of Uganda’s use of counterpart funding tends to be less closely conditioned. However the lack of strong monitoring mechanism for the use of these funds and often an unclear positioning of a large number of projects means that budgets are poorly oriented towards results and flexibility actually results in the funds being used less, and not more efficiently, (Bevan and Adam 2001, P. 26)
“Uganda had continuing sporadic problems with aggregate fiscal
discipline since initiating reforms in 1987. This resulted in
stop-and-go delays in the disbursements of Fund-Bank (World Bank) and
other donor assistance until adjustments were made to bring the program
back on track with the Fund-Bank targets. This pattern, however,
culminated in a full-blown fiscal crisis in 1991/92, when the budget
deficit jumped from 4.4 percent of GDP in the preceding year to 7.7
percent of GDP. However, swift action came not as much from donors as
from President Museveni himself. The then Minister of Finance was
replaced, and the Ministries of Finance and Planning were merged. The
president gave a speech, which is plastered on the walls of many
Ministry of Finance staff. “Inflation is indiscipline. If there is no
money, you must walk or close down Ministries”. The Political commitment
that this signalled was buttressed by the computerised, monthly cash
management system that was developed to impose cash limits and improve
coordination among the central agencies. The result is that the budget
deficit has been more than halved from 7.7 percent of GDP in 1991/92 to
reach 2.9 percent of GDP by 1994/95.” (Campos and Sanjay, P. 29)
“In addition, NGOs participate actively in the review of programs and projects to be included in the annual PAF budget, while select NGOs and donors are invited to take part in the working groups, which are responsible for the development of sector spending projects. Moreover, district councils are envisaged to play an important role in the selection of projects included in district budgets.” Uganda and IMF, (P. 3).
A committee monitors the pace of implementation of projects funded
under the PAF on a quarterly basis. The committee is comprised of
parliamentarians, donors, select NGOs, the media, and the government.
(Uganda: enhanced structural adjustment facility policy framework paper
1999, 2000-2001, 02).
For example, “the existence of collectively agreed targets and performance criteria has led to increased donor coordination”. (Williamson, 2003, p. 70). This would suggest that the donors want to coordinate the projects that they support. If that happens, then the participation of the stakeholders becomes peripheral hence compromising their independence.
2.16 Supplementary funds
The central government in some cases has been reluctant to devolve some of the funding to the local governments. “All local governments receive an unconditional or block grant that largely funds administration costs and salaries as the central government has been unwilling to devolve discretionary funding to local governments for service delivery due to concerns over the capacity to allocate funds and manage programmes on their own”. (Williamson 2003, P. 9.)
However, what is most important is how the allocation fits in the budget. The local governments may be held hostage by the fact that their independence in terms of expenditure is limited in some cases. This has an effect on their level of budgeting and budget execution.
“Most development activities are funded through sectoral conditional grants; however it is important to highlight the innovative local government development programmes for funding. This provides discretionary grants to districts and sub-county local governments; however, they first have to meet a set of minimum administrative and implementation capacity criteria, which are assessed annually. The grant is used for small-scale investments at the district and lower local governments”. (Williamson 2003, p. 9)
It is difficult to see how some sector allocations are reduced to make room for increases in the emerging sectors enabling them to achieve more of their sector targets. Instead there is a danger that the budget process is reduced to one where sectors focus on trying to solicit additional resources from the MFPED for the following year.
Notable is that rather than justifying intra-sectoral allocations on the basis of results over the medium term, sectors often only make efforts to use output indicators and targets in the context of justifying increases in sectoral budget ceiling for the following financial year. As long as the sectors know that, there is a possibility of getting additional resources during the budget process, their attention may be focused on this even if they do not achieve it. (Bevan and Adam, 2001)
Currently, rather than justifying existing intra-sector allocations based on results over the medium term, sectors often only make efforts to use output indicators and targets. This is done in the context of justifying increases in sectors’ budget ceiling for the following financial year.
2.17 The role of sectoral committees
“The Ministry of Finance introduced the concept of results into the MTEF process in 1998 with the introduction of outcome/output oriented budgeting (OOB), on a sector basis. Sector expenditure decisions are supposed to be justified in terms of the past performance and expenditure levels in terms of specific out puts they intend to achieve.” (Williamson, 2003, p. 23)
“The main entry points for OOB in the budget process are the sector working groups, and the tools are the reports prepared by these groups that are consolidated in the national budget frame work paper (BFP). The Ministry of finance provides sector-working groups (SWG) with terms of reference for the preparation of their reports. The sectors are supposed to identify output, intermediate outcome indicators and review sector performance against set targets. The targets set need to justify the sector budget allocations. Indicators and targets are not yet formally linked to the budget structure, since they are not yet programme based.” (Williamson, 2003, p. 23)
“During the budgeting process, sector working groups through the
preparation of their contribution to the budget framework papers are
therefore required to analyse the past performances in relation to
achievement of out put and outcomes relative to the past targets and set
output or outcome targets to be achieved overt the MTEF period”.
(Williamson, 2003, p. 25).
The Sector wide approach is about priorities. For each sector, there is a committee. This committee deals with budgeting for the particular sector. These include water, UPE, PHC among others. These sectors are poverty eradication focussed. These are protected against budget cuts.
Stakeholders in the budgeting process should lookout for developmental projects and address them in good time. In the mean time, it looks like budgeting for the identified sectors is addressing the poverty situation. There is need to establish whether the sectors actually address the poverty situation.
2.18 Budget execution
Operational recurrent budgets are often very small allowing only limited real flexibility. Flexibility largely depends on the extent to which the permanent secretary delegated responsibility. The use of donor project funds was prescriptive, however government of Uganda’s use of counterpart funding tends to be less closely conditioned. The lack of strong monitoring mechanism for the use of these funds and often an unclear positioning of a large number of projects means that budgets are poorly oriented towards results and flexibility actually results in the funds being used less, and not more efficiently.
Allocation based on the status of an out put/ service level indicator actually creates perverse incentives, which undermine rather than promote budget efficiency. For example, LGs receive higher grant allocations based on how worse the classroom pupil ratio is. If a LG wants to maximise future revenues, it is in its interests either to use the funds inefficiently or to understate the stock of classroom and overstate enrolment.
Virement is the process of transferring expenditure provision from one line item to another during the budget year. To prevent misuse of funds, spending agencies must normally go through administrative procedures to obtain permission to make such a transfer. Managers at each appropriate level also need to understand and must be committed to the results they are supposed to achieve (through participatory planning process). They must also be allowed enough flexibility in adjusting planned outputs during the financial year, in case unforeseen circumstances arise. For example, if heavy rains destroy key bridges, it makes good sense to divert resources from planned new road construction to the rebuilding of bridges on existing roads. (Bevan and Adam, 2001, P. 31)
Even now rather than justifying the existing intra-sectoral allocations based on results over the medium term, sectors only make effort to use output indicators and targets in context of justifying increases in the sector’s budget ceilings in the following year.
Currently local governments have no flexibility in allocation from one conditional grant to another and there is a creeping tendency for sector guidelines increasingly to limit flexibility available within grant allocations. Although the allocation of grants may be linked with sector results, often the conditions with each conditional grant are tied to inputs as well limiting the flexibilities that local governments have even further.
For example, in the roads sector, the proportion of the grant that local governments must spend on periodic and routine maintenance of roads is fixed. While there is a specific percentage of an education grant, which must be spent on different inputs such as instructional materials. In addition, staff numbers and remunerations are set and the payroll managed centrally for health, education and agricultural sectors. These input conditions however restrict the flexibility managers to improve service delivery.
Ministries may make adjustments up to 10 percent between line items within their budgets in the course of the financial year. Sums exceeding this figure however require MFPED approval. Although this flexibility is there, senior ministry officials have little flexibility over the use of financial inputs. Operational recurrent budgets are often very small leaving limited room for real flexibility. Flexibility also depends on the extent to which the Permanent Secretary delegates authority. (Bevan and Adam 2001)
“… the lack of strong monitoring mechanisms for the use of funds, and the often unclear institutional positioning of large numbers of projects means that budgets are poorly oriented towards results and the flexibility actually results in the funds being used less efficiently”, (Williamson 2003, P. 32.).
Williamson ignored the fact that the system of monitoring the utilisation of resources is in place. What is true is that there is room to improve the monitoring structure.
Effective from financial year 2004/5 government rolled out the budget preparation and reporting mechanism based on the financial decentralisation strategy (FDS). To ensure smooth operation of the modality, detailed guidelines were provided during this financial year and training has been carried out in the local governments. The guidelines are being reviewed and the review will be disseminated during the regional workshop for FY 2006/7.
Local government finance commission is advised to liaise with the ministry of public service to ensure that the wage component under the unconditional grant is allocated among the local governments according to the approved structures.
Conditional grants especially under PAF will continue to cover the highest national priorities. These include UPE, PHC, rural feeder and urban roads, agriculture extensions, rural and urban water and sanitation, monitoring and accountability, NAADS, functional adult literacy and non-sectoral grants.
Central government transfers (conditional, unconditional and equalisation grants) to local governments are channelled through line ministries. Donor funds constitute revenues to local government and should be incorporated in the revenue and expenditure budgets of local governments. Sector ministries and local government finance commission should therefore ensure that the revised guidelines for the allocation schedule by local government are made available for distribution to local governments.
The delays are at every level of the budget cycle, but it actually starts from the formulation of the macroeconomic framework itself.
The delay takes place partly due to lags in the availability of relevant data and partly due to the late timing of negotiations with the fund (IMF) and the bank (World Bank) on the macro framework. The result is that line ministries are asked to submit budget proposals without any credible ceilings, resulting in bids far in excess of available resources. …” (Campos, undated, p. 30)
Notable is the lack of what ought to be done to eliminate delays. Delays have an eminent effect on the budgeting process and its out comes. There is need to study the various problems that emanate from such delays and how they can be averted.
2.21.2 Budget cuts
What is true is that budget cuts undermine the approved budgets and compromises the process of budgeting. They also affect achievement of projects and programmes to the detriment of the population.
Budget cuts occur almost consistently in Uganda and at all levels. It is possible that the cuts are inevitable in some cases. However, much as the reasons may be genuine, there is need to establish if some of the resources are not spent out of the budget. The literature does not give detailed analysis of the cause and effect of budget cuts.
2.21.3 Variance between budget and allocation
Compos and Pradhan give the ministries of education and justice as those that take the largest sums of the budget. Possibly the ministry of defence should also have been included on the list especially since in 2002/2003 financial year the budget was cut by 50% across the board to handle the war in the Northern part of the country. This simply means that there is need to investigate the other big beneficiaries of budget relocation responsible for cuts from other sectors.
2.21.4 Technical efficiency
The argument is that the technical personnel are very few and are poorly remunerated. This tremendously affects their budgeting performance and morale.
It is therefore important to establish ways of improving their efficiency through addressing the issues stated. The central government in consultation with local governments should raise the necessary resources.
2.21.5 Medium term expenditure framework (MTEF)
Uganda has moved aggressively to institute reforms to control aggregate spending and prioritise recurrent expenditure through a medium-term expenditure framework (MTEF). This is an attempt by the government to internalise the expenditure prioritisation process previously undertaken by bank PERs. Strategic prioritisation of resource allocation in the MTEF first emphasised expenditures for the priority programme areas (PPAs), including primary education, primary health care, road maintenance, (Bevan and Adam (2001).
Bevan and Adam (2001, p. 23) assert, “The MTEF is the comprehensive vehicle for budget planning, and in principle all relevant funds are supposed to pass through the budget, and be monitored accordingly. At first sight, a poverty fund is either redundant, or, if not, risks subverting the integrating features of the MTEF. One argument for this retention might be that it is better able to ring-fence priority expenditures; but that would imply a failure of the MTEF itself, which should be charged with this role. Much the same argument applies to the requirements for accounting and audit, expenditure tracking studies, and monitoring of outputs and outcomes”.
The research employed the individual in-depth interview guide to collect the data from the selected population. The subjects of the study were mainly individuals who were in some way involved in budgeting. The subjects of the study were purposively selected because of the roles they played in budgeting. Purposive sampling was intended to capture people with budgeting knowledge and ideas who would adequately inform the study.
In data analysis, cross case analysis was used to analyse qualitative data. On the other hand, statistical package for social sciences was used in analysing quantitative data and generating graphs and other related diagrams.
3.2 Research design
The researcher intended to generate qualitative data in order to make generalised conclusions that would help policy makers in addressing the limitations in the budgeting process in the country.
The sample was determined purposively as the study was quite specialised. Only people who were involved in budgeting could give useful responses. Data collection employed an individual in-depth interview guide. Analysis was done using cross case analysis and statically package for social sciences (SPSS).
The interviewer guided the interviewees to ensure that the latter maintained focus on specific issues of the budgeting produces. The interviews were taped using a tape recorder. All the respondents were asked questions in the same way hence making it easier to replicate the interview. This also made it easier to standardize and thereafter provide a reliable source of quantitative data.
Source: Lands and Survey Department, Entebbe Uganda.
3.4 Research methods
3.4.1 Primary data collection
Primary data were collected using an individual in-depth interview guide. The structured interviews had the advantage of providing detailed information on specific issues without the danger of the interviewee deviating into other unrelated subjects.
The individual in-depth interview guide was pre-tested in Mukono district, which was not involved, in the final study, and modifications were made. The intention of the pre-test was to determine the completeness and reliability of the instrument.
The pre-test was preceded by two days of training for one research assistant who carried out all the interviews. During training emphasis was placed on key concepts and processes of the budgeting process.
The report of the pre-testing highlighted the necessary changes necessary for the improvement of the instrument. The results of the pre-test therefore were analysed and used to adjust the instrument. Most of the questions were rephrased to meet acceptability of the respondents and to generate relevant responses.
The researcher visited a number of libraries in order to access some
materials on budgeting in both Uganda and other countries. The libraries
visited included, Nairobi University Library, Jomo Kenyatta University
of Agriculture and Technology (in Kenya). Other libraries visited were
Makerere University library, Centre for Basic Research, Ministry of
Finance Planning and Economic Development (in Uganda).
The guide was designed for data collection through a consultative process with government officials and key stakeholders involved in the budget process. The instrument was informed by published and unpublished work as well.
The data collected using the individual in-depth interview guide were taped using a tape recorder.
Of the selected sample, 18 in-depth interviews were conducted with the following officials:
District level: The following people were purposively selected:
Municipality: The following officials were selected:
Sub-county level: The following people were selected:
The actual data collection exercise was conducted in the month of May 2006.
The data collected was taped on nine tapes. The responses were then transcribed and analysed using cross case analysis and statistical package for Social Sciences (SPSS).
The data were transcribed verbatim based on tape recording by two university graduates. These transcripts were typed using Microsoft Word for ease of analysis. Coding was done to convert the otherwise qualitative data into quantitative data for analysis using SPSS.
Cross-case analysis was useful for the study in deepening the understanding and explanation of particular concepts. Through the process of examining multiple cases (for example, the multiple geographic locations, multiple stakeholders and multiple concepts) examined in the present study, the researcher was able to determine the specific conditions under which a finding (for example, execution of the budget process) would occur.
Additionally, the researcher was able to form the more general categories of how conditions such as political influence in the budget process differ in different contexts.
Cross-case analysis became even more useful when it was approached using themes across cases. For example when examining the steps involved in the budgeting process across multiple settings. This is what is commonly known as the variable-oriented approach. The variable-oriented approach (Miles and Huberman, 1994) was deemed most appropriate for conducting the analysis across cases.
The goal of the study in the qualitative component was to understand
how the budgeting process is implemented in the areas and levels under
study. A case-oriented approach would consider the case (for example,
Kabale district) as an entire entity ─ looking at meanings,
associations, causes and other variables of influences during the
budgeting process within this particular setting, before embarking on
comparative analysis with a limited number of cases.
Given that this study was geared towards supporting the budgeting process at the local level of governance in Uganda, the researcher deemed it more profitable focusing on the understanding of general interpretations and understanding of the budget process than on particularities of a case. This explains why the variable-oriented approach was used to generate generalised conclusions.
All the responses to each question in the transcribed qualitative data were listed, harmonized and coded (assigned numbers) before being input into the programme. The harmonisation was necessary since respondents had varying approaches in responding to the questions posed without necessarily giving different answers.
The following is an example of coded response:
The investigations were centred on Kabale district 25 participants were purposively selected but only 18 responded to the research instrument.
This chapter is organised under the following headings: the budgeting process, budgeting estimates, steps involved in the budgeting process, availability of human resources to handle the budgeting process. In addition, influence of misappropriation of funds and politicians on budgeting process, understanding of budget estimates, preparation of budget estimates, the indicative planning figures and how they are obtained, stakeholders in the generation of these indicative planning figures, the budget conference, and budget are also discussed.
Finally, discussion is made about the role of sectoral committees,
executive committee, the budget desk and budget execution, budget
appropriation, utilisation of funds, accountability, vote on account,
supplementary budgets, virement, auditing, desired improvements in the
The budget process in Uganda falls within the Poverty Reduction Strategy Paper (PRSP) consultative process where the people at grassroots level are mobilised to participate at the planning stage. Stakeholders in this process are non-governmental organizations, research institutions, civil society groups and individual farmers, women, youth, elders, people with disabilities and opinion leaders among others. The inputs from these stakeholders are often sought at various workshops held at the grassroots.
This study therefore found it necessary to establish the general understanding of the budget process by the respondents who represent the various stakeholders in the process. Although responses varied from one respondent to the other, the impression was that they do understand what a budget process entails. Their responses are summarised in Table 2.
Terms Number of respondents
Table 2: Important aspects in budget process
4.4.1 The national budget consultative meeting
The consultative meeting is followed by a budget workshop in November to which district top leaders involved in planning and budgeting are invited. The Indicative Planning Figures (IPF) for each district and sector are discussed at this workshop.
These sector-working groups (SWGs) use the indicative budget ceilings to arrive at intra-sectoral allocations. Allocations are justified in terms of past performance and future targets within the budget framework. The outcomes are then disseminated to the sub–counties, parishes and villages. Based on intra-sectoral allocations agreed, ministries, districts and other agencies prepare draft budget estimates.
4.4.2 Planning process at the sub-county
4.4.3 The budget conference
In the budget conference, district goals, challenges and vision are discussed and priorities agreed upon. Inputs from all stakeholders are captured and projects/programmes that cannot be implemented at this level are forward to the district or municipal council. The prioritised projects are sent to the technical planning committee (budget desk) to establish if the projects budgeted for are viable and feasible. The technical planning committee summarises the inputs of the budget conference and forwards them to the relevant sectoral committees.
4.4.5 The sub-county executive committee
After costing, the document is taken back to the district executive committee for polishing and onward presentation, as budget estimates to the full council for discussion and approval. The secretary of finance presents the draft proposal to the plenary of council for amendment and approval. After approval, the budget desk incorporates the amendments from the plenary council to produce the final copy of the sub-county annual budget, which has to be endorsed by the sub-county chiefs/senior assistant town clerk.
Figure 6: Steps in the budge process
The overview of sector policies and objectives will contribute to the first section of budgetary framework papers. As such, it plays a critical role in setting the framework for proposed budget strategy over the medium term. The overview is expected to identify the rank sectoral priorities, and to specify the desired outcomes. It should also identify the required outputs to achieve these outcomes. Policies and priorities must be linked to the poverty eradication action plan (PEAP) objectives.
Between April and May of each year the budget committee of parliament discusses the BFP and presents recommendations to the president and the Ministry of Finance Planning and Economic Development (MFPED). A national public expenditure review meeting is held at which the BFP is discussed. Finally, in June the budget is finalised. Finalisation of budget is done based on parliamentary /PER recommendations has proposed budget and Mid-term Expenditure Framework (MTEF) is amended by MFPED. In the same month, the budget is read to the Nation through parliament.
4.5 Availability of human resources to handle budgeting process
The budget desk was noted to be one of the budget process entities
that have qualified personnel to handle the budget process. It is
composed of district planners, statisticians, the population officer and
finance officer who are available and active. There are accountants at
the district, divisions, sub-counties and municipal levels who are
capable of running the budget process. During the recent restructuring,
some staff members were availed to the understaffed area.
However, restructuring might also have affected other sectors from which transferred staff came. Besides, some committees, which are important in the budget process, are composed of elected leaders (politicians) who might not be familiar with the budgeting procedures and technicalities. The standing committees for instance are mostly composed of councillors. Although technical staff members are involved, by invitation, in such committees, the issue of poor facilitation weakens the effectiveness of such committees. The councillors may not be exposed to budgeting procedures due to limited training. Therefore, they either rubber-stamp what professional civil servants present or argue in defence of their political interests. It was also noted that the kind of geographic area and scope in terms of assignment to cover is bigger than the skills or number of qualified personnel that exists.
According to the local government Act (1997), the budget desk is composed of members such as the district planner, statistician, population officer and senior finance officer, positions that are substantively filled in the case of Kabale district. However, the budgeting process is not limited to the district level. The sub-county level and the lower levels do not have similar human resources. The implication of this is that if the lower level does not do correct things, then the higher level will proceed on wrong premises. At lower levels, the position is more precarious. The councillors have inadequate capacity to comprehend budgeting at higher levels.
Also worth noting is the fact that the councillors who are
politicians are involved in the budgeting process. Yet, most of them are
not skilled. To that extent, even when they participate in the budgeting
process, they have limitations.
The local politicians should also be educated on the need to collect relevant information with regard to their constituency need to contribute to the budget. Otherwise, projects will not reflect the needs of the population. During budgeting, they should continue to assess the extent to which their constituency needs have been taken into account in a particular proposed or approved budget.
Politicians together with their constituents need to be sensitised on
the fact that improper allocation of resources during budgeting leads to
waste. This was can only be avoided if the projects and activities
identified are relevant to the development of the population and poverty
However, a number of factors hamper involving all stakeholders in the budgeting process. This is because budgeting is done in a specific timeframe, which may not favour participation of all stakeholders. For example during farming seasons, popular participation in budgeting is not possible.
The other problem is limited technical human resources at the various levels of administration with limited mobilisation skill. In order for the population to be fully involved in the budgeting process, they need to be mobilised and sensitised.
There is lack of clear tangible benefits earmarked for the people who participate in the budgeting process. Therefore, there is nothing to persuade them to forfeit their work, which is a source of income in order to participate in budgeting. This results in irregular participation, which affects the quality of the budget at the end.
There is also lack of clear channels in the budget process for local governments to forward projects they are unable to handle to the central government and get feedback.
4.6 Influence of misappropriation of funds on budgeting process
However, for the CBMES to be useful, its composition must be carefully selected. The level of education of the members and their experience will be critical if they are to perform their duties efficiently.
The monitoring committee, which would include members of the civil society, would mainly be concerned with ensuring transparency at every level of the budget cycle. The decision to create budget-monitoring committee is a result of the realisation that misappropriation would translate into less allocation of funds to projects that would otherwise benefit the local people. This would ultimately lead to incomplete projects or their postponement to the following fiscal year.
Once there is misappropriation of funds, what had been budgeted for cannot be implemented in full or one is forced to bring it forward to another financial year. This causes problems because the people in the parish or in the sub-county who sought out and brought up projects for implementation in a particular financial year will be disappointed if the projects are not carried forward. The failure to implement the projects in essence means perpetuating poverty. One of the respondents asserted, “Misappropriation if not checked creates a spiral of problems instead of projects that had earlier been planned for”.
4.7 Influence of politicians on the budgeting process
With the exception of one, respondents were of the opinion that
politicians do influence the budget process in various ways. Figure 2
shows various stages at which the politicians can influence the budget
process. Most of the respondents pointed out that politicians influence
the budget process particularly at allocation of resources and approval
stages. A number of the respondents also believe that some influence
from politicians can occur at the stage of project prioritisation.
While politicians would push for their projects to be given priority they would also reject a budget, which does not address their concerns at the approval stage.
Williamson asserts thus, “Within rural and urban local governments there are three layers of local government with elected politicians and five layers of administration. The vast majority of grants are channelled to the local governments as ‘conditional grants’ earmarked by central government to specific areas of primary service delivery in sectors mostly under the PAF.”
Politicians are very instrumental in determining what is to be budgeted or not. They set the agenda. At all the local government levels of budgeting, there are politicians. They may be LC3 council members, LC4 council members or LC5/ district council members. At all these levels, they ensure that what may easily influence their return to office at the next election is put on the agenda. In the same vein, whatever may affect their possibility of returning to office may not find its way to the agenda.
Whereas the technocrats in the budgeting process may be very genuine in their action, political considerations may play an important role. On page 19 of their book, Lee and Johnson (sic) correctly contend as follows, “Whereas a purely rational approach might suggest the budgetary decisions are attempts to allocate resources according to economic criteria, the incrementalist view stresses the extent to which political considerations outweigh calculations of optimality.”
The study established that the executive committee is a policy initiator. For that matter when the budget proposals are presented to the executive committee or to council they are influenced politically. This is especially the case in the allocation of resources. For example determining where to take a project is an issue that technocrats may contribute to in terms of information.
The politicians to strengthen their argument and subsequent decisions use the information given by the technocrats. However, the decision is politically directed. For example when looking at classroom construction under school facility grant (SFG), they use pupil classroom ratio per sub-county. Then they present this information to help the politicians to determine the more deserving sub-county and decide. In this way, the district management ensures that there is equitable distribution of resources.
It is important to note that, politicians have constitutional powers to approve the budget. (Article 190, 1995 Uganda Constitution). Therefore, the budget must meet their expectations. They must gauge the interests of the people and decide where the resources should be channelled. However, politicians may also misuse their position if they are not careful. For example, some politicians may want to use the money to influence perpetuation of their next election.
At the same time, politicians and other interested parties may want to direct the budget of the year towards benefiting their own constituents. For example, a councillor from Kaharo may want to include projects in his constituency not because it is the most critical, but because it will benefit his own people. Hence, if politicians do not exercise restraint, they may end up practicing nepotism. This is one way politicians can wrongly influence budgeting.
The politicians in other words have the power and the will to drive the budgeting process. They set the agenda of the budgeting process. In other words, they determine the projects that will be implemented and direct the technocrats to undertake them accordingly. With the power they have (which they derive from Article 190 of the constitution,), if not guided, can misdirect the process.
Figure 10: What budgeting estimates entails
Most of the respondents were sure of what goes on in the estimations for the budget. This gives great hope that they understand what they are doing. It shows that they fully participate with the knowledge of what they are supposed to do.
However, given that some of them did not understand what the estimates entail, casts a negative picture. This may mean that they do not understand what they actually do in the process of budgeting where they sit. This therefore calls for the need to educate them as soon as possible on matters of budget estimates, what they entail, their source and purpose.
If some education is given, then they will be sure of what is expected of them during budgeting. Both the central and local governments have to realise that the minimum qualification to be a councillor and the LC 2, LC3 or LC5 do not include capacity to budget. Hence, training is required.
4.9 Preparation of budget estimates
From the response above, one discerns that members of the budget desk actually do most of the budgeting work. However, the politicians just agree on the priorities. My contention in this study is that the politicians should perform more. They should not only agree on priorities, but also deal with how the resources will be sought and utilised. They should fully participate in the whole process except where procedurally, the function of the technocrats.
Unless the stakeholders are fully aware of the details of the
process, they will not understand the full process. For example, if they
do not understand the source of the indicative planning figures, then
they will not appreciate the various limitations with the budget
execution. Hence, all stakeholders in the budget process should
endeavour to understand the full process including the source of
The figures are generated based on various parameters such as population, water coverage, percentage coverage of immunization and internally displaced person’s camps. The internally displaced person is being used for the district in Northern Uganda where there has been an insurgency and people restricted to camps. The allocation of money at all levels is based on these parameters. Based on population for instance, each person is presently allocated 2 dollars. Therefore, if a sub-county has a population of 400,000 people then it would be allocated 800,000 dollars.
In developing the indicative planning figures, they use the budget framework paper (BFP). The BFP stipulates the sectoral allocation through what is called a resource envelope. The resource envelope indicates what is available for the coming year for implementation of the various programmes and projects. These BFPs are communicated by the MFPED during the regional budget conferences. However, at the regional workshop, individual members argue for their sectors in relation to policies passed by parliament. As one responded noted “after we have got the indicative planning figures by the ministries, what happens is that the ministry would normally compile the figures related to population and each person is allocated 2 dollars, its actually one dollar. I understand it has been put to two dollar but it has been one dollar” .
For example, Kabale district has a population of 485,000 people. To get the ideal figure under LGDP, you multiply two dollars by the population. This gives you the ideal for the particular plan. “For other sectors such as water, they look at water coverage so far; for health centres epidemics, the percentage coverage of immunization so that each district does not lag behind the rest. Actually, in Northern Uganda, they consider other factors such as internally displaced camps (IDPs) so that eventually the line ministry is able to allocate what is ideal to each particular district. When we also get this ideal from the central government we also break it down and allocate the money to the sub-counties based on the same parameters” .
4.12.1 Stakeholders’ expected contributions
When it comes to the Inspector General of Government (IGG) or the Auditor General, one would like to know how much is going to these districts such that they make a guided follow up because of their mandate. When it comes to ministry of finance, they need to ensure that rationally, resources are equitably distributed. Therefore, each stakeholder has his own role in the budgeting process, preparation, monitoring and implementation. At this point, the concern of the public sector both at local government and central government levels with the civil society organisations is how to increase popular participation to enhance transparency and enrich the database.
To this effect, Folscher and Krafchik’s (1999) advice on how the
citizen can be involved in the budget process is as follows:
4.12.2 Stakeholders in the generation of indicative planning figures
§ Government officials from various ministries such as Permanent
Secretaries, Chief Financial Officers, Chief Accounts Officers,
Inspector General of Government (IGG), Chief Administrative Officer,
Planners and Economists. Each of them has particular roles or
contributions to make in overall process of generating the indicative
planning figures. Officials from the finance Ministry for example have
the role of rationalizing the distribution of resources to ensure
fairness. While planners would review the performance and share
challenges faced by various sectors of government, the Auditor General’s
interest would be to know the allocation of various districts and
sectors for the purposes of monitoring.
Table 4: Challenges stakeholders face in the generation of IPF
The stakeholders in the generation of the planning figures are normally faced with numerous challenges. The majority of the respondents as indicated in Table 4 pointed out the issue of limited funds.
Limitation of funds means that the stakeholders would come up with
figures, which do not necessarily address effectively the needs of the
people. At least four out of the 18 respondents had problems with the
delay in the release of IPF guidelines. However, this might not
necessarily be a challenge in the generation of IPF but in the
subsequent steps of the budget process.
The other challenges relate to late releases of funds. Mr. Ampumwize had this to say about late releases, “As I speak now, this is 12th of May, we are just left with one and a half months to the end of the financial year, and we have not received some quota of money which should have been used in March and even for this quarter. Therefore, once the money comes, we shall be rushing, yet, under the accountability and finance Act any balances by 30th of June should be taken back to the treasury. So you can see the challenge” .
The other challenge is on implementation. The private sector is still financially very weak. Companies sign contracts for projects but take too long to complete them mostly because they have very narrow financial bases.
Other challenges were lack of cooperation among stakeholders to achieve common goals, interference from central government and lack of relevant skill by some stakeholders (especially representatives from local authorities and civil society). Government interference may come in form of policies, which dictate sectors that should be given priorities over others.
The successes were viewed in terms of the number of improvements in the budgeting process. Until recently, the members of the budget desk would work on every thing manually. Today with the assistance of strengthening decentralisation in Uganda (SDU) a USAID Project, they have developed budget software. With just a few key figures keyed in, things just balance within a minute. This software has a manual, which makes it user-friendly.
If the country is to enhance performance in the generation of IPF, government should ensure that every one involved in budgeting in the whole country is trained on the use of this software. Otherwise, the process will remain slow and inadequate.
Secondly, the budget desk used to generate the budget for all sectors. Today, sectors also plan, and bring it to the attention of the budget desk. The budget desk then integrates the data and generates the district budget.
Thirdly, the other improvement is output oriented budgeting (OOB). Currently, budgeting is based on anticipated output, which never used to happen. For each sector there are set indicators vis-a-vis output oriented management. This has resulted in disciplined expenditure.
The other improvement is on the budget control system. In the past according to some respondents, the district used to have many arrears with suppliers and contractors. Today with the budget control system in place, they make sure that by the end of the year, all payments have been done. Now the district is able to start a new financial year without arrears. This in essence means they only order what they are able to pay for. In case some bills go beyond a financial year, then in that financial year, the new financial year they take the first priority. Given the history of budgeting and financial management in Uganda, these three improvements mark a very big leap forward.
Another improvement lies in the involvement of other stakeholders. It is a great step in the right direction that every interested party is involved in planning and budgeting. The private sector and the public partnerships now plan together with other stakeholders like civil society organizations. In the past, the public sector used to plan separately but currently, whatever projects they intend to put up they involve every one in the planning. For example, if they are to put up a school building, they contact the non-governmental organisations such as world vision to find out whether they intend to build the same. This coming together normally helps to avoid duplication of services and misallocation of resources. If for example World Vision had intensions of putting up similar structures, then they do it elsewhere.
However, there is a big problem of constant changes in IPFs. In one budget year, different IPFs can be sent to local governments about three times. Hence, the local levels cannot be sure of the final IPFs until it is quite late. This makes planning very challenging and needs to be addressed.
4.12.5 Budget call circular (BCC)
The circular also provides guidelines on the preparation of budget
framework papers (BFPs) and preliminary budget estimates of revenue and
expenditure for the following fiscal year.
a). Indicative planning figures and the resource envelope
The BCC guides accounting officers on relocation of funds if necessary. For example, it states, “where improving outcomes may require relocations from development and non-wage recurrent to wage and vice versa, clear justification should be made and should be in conformity with PAF ceilings and the government reform strategy”
b). Level of flexibility associated with the resource envelope
This means that when communicating in the budget call circular the level of flexibility has to be indicated. In essence, the people budgeting would only budget for 95 million and not 100 million shillings in the case cited. Then each sector suffers that apparent percentage loss, but later they jointly agree on the priority that can again benefit from this pool.
c). Policy changes from the central governments
The BCC also spells out the aims of the budget of the year. For instance, the 2005 budget call circular aimed at improving efficiency of all public expenditure this was to ensure there was value for money in terms of both quality and quantity of service. Value for money is a key undertaking of government. For this to be realised sector working groups were urged to take lead in identifying efficiency measures in the sectors which would lead to pro poor expenditure.
The budget of the 2006/7 was identified as consolidating and deepening the rural industrial growth strategy. All recurrent and development expenditures, new project proposals and changes to existing projects and recurrent costs, must be presented in terms of how they relate and satisfy the priority activities agreed on under the PEAP and the rural and industrial development strategy.
4.12.6 Sending and receiving of the budget call circular
The circular spells out the challenges for the medium term and the proposed budget allocations for medium term (MTEF) and related out puts. The proposed expenditure out puts and out comes for the coming fiscal medium term. The circular also shows the Non-tax revenue projections for the next five years.
It is through the BCC that the Accounting officers are reminded of the requirements of the budget Act 2001 sections 3 and 5, which guide the preparation of budget estimates for every financial year. Consequently, in the preparation of the budget estimates for the recurrent and development revenues and expenditure for the financial year, it is important to note that the budget Act 2001 stipulates deadlines and has implications for the timing of submissions and discussions of the draft estimates by parliament.
Most of the respondents did not know the exact period when the budget call Circular is sent/ received as shown in Figure 6. Otherwise, while the budget call circular is supposed to be released from the central government around November of every year, the time of receiving it varies from year to year or from one level to the other.
The fact that most of the respondents did not seem to know much about the budget call circular yet they are involved in the budgeting process spells a problem. All the respondents were selected based on their involvement in budgeting. This was because of the positions they held in society or governments circles.
If these officials do not know about such an important stage of the process, then it means they never put enough time and thought in it. To that extent, they need to be more sensitised on the reasons to get more interested and involved for the benefit of the process and development.
This makes one conclude that even if the trend of involving all the stakeholders in the budgeting process is a step in the right direction, there is a lot to be done. The population needs to be made interested in the process and look forward to it.
4.12.7: The time of the year the budget call circular (BCC) is sent out
However, at some levels, especially with the local councils, petty politics may interfere with the smooth running of the process. One respondent noted that the politicians sometimes reject the budget circular guidelines insisting on particular amendments. This explains why amended circulars can be received as late as May/June and hence delaying the process. Table 6 shows that levels, which received the BCC in November or December, found the time to finalise the budget proposal more adequate compare to those who received the BCC later.
Table 6: Adequacy of time between budget finalization and BCC
Regional workshops have been found very useful in the budgeting process for Uganda. In their paper, Foster and Mijumbi assert as follows: “The budget process includes regional workshops at which local government planning and budget staff exchange information and views with the MFPED budget directorate. It has been an opportunity for districts to feed back their difficulties with the guidelines and procedures for accessing budget funds, while it has also enabled MFPED to train and support districts in planning and budgeting.
There is a marked improvement in the quality of plans and budgets in the second year in which districts have been included in the MTEF process. Government nevertheless accepts that present arrangements for local government finance may be too bureaucratic, and is trying to increase flexibility, while so extending nationally an approach to piloting participatory district level planning, supported by capacity building at district and sub-country level. The DDP approach … helps local governments to meet minimum standards of planning and accountability before funds can be accessed, but raises the standard to be achieved in subsequent years, providing incentives to build capacity”
Kullenberg and Porter (1999) have attempted to explain what district
development project (DDP) is but ended up explaining what it is not.
They assert as follows: “The DDP is not a typical stand alone donor
programme. It tests mechanisms and procedures for decentralizing capital
budgets to the lowest feasible level to provide services mandated in the
local government Act of 1997. The project is fully integrated within the
local government system so that government can draw lessons (both
positive and negative) to inform national policy of the full-scale
decentralization of development budgets scheduled to occur over the next
three to five years”. (Kullenberg and Porter, 1998)
4.12.9 Expectations of budget call circular recipients
Figure 12: Expectations of budget call recipients
On receiving the budget call circulars, each sector follows the schedule given until sector work plans and indicators are produced. Normally the budget call circular has periods within which particular activities have to be accomplished.
The major expectations, are the policy changes that may have been instituted by the central government and therefore in the budget. They want to know by how much the resource envelope has grown as compared to the previous year. They are interested in knowing whether the policy changes so instituted may have affected their departments. They are also interested in the level of flexibility. Those are the curious expectations of the recipients of the budget call circular.
4.13 The budget conference
An invitation letter is normally sent to the various stakeholders informing them of the dates and agenda of the conference. On receiving the invitation, stakeholders are free to do consultations and lobbing among themselves before the budget conference.
The respondents stated that the conference begins by electing a chairperson from among the attendants. In most cases, it could be the speaker (not in his capacity as a speaker), town clerk, and secretary for finance, sub-county chief or any other committee member.
In attendance are often many stakeholders. Among them are local leaders, opinion leaders or elders, religious leaders, sub-county chiefs, council staff, town clerk, LC chairpersons, councillors, sectoral committee members, representatives from civil society and other non-governmental organizations, technocrats, government officials, area Members of Parliament (MPs), the public and donors.
“The current handling of the budget conference is a marked departure from how it used to be handled in the past. Unlike in the past where people were called to the budget conference for councillors to read for them submissions from the various Sub-Counties and hand them over to the budget desk to develop a summary of submissions to the executive committee, these days, there is a lot of brainstorming” .
Another respondent asserted, “budget conference is another area where
improvement has been made. In the past, we would call a budget
conference and councillors would come here to listen to submission from
sub-counties after which the reports would be handed over to the budget
desk to generate a summary submission to the executive committee.
However, nowadays at a budget conference, a number of issues are done:
Otherwise, priorities, which are not related to the challenges of the local government, would end up being considered. So in the budget conference these challenges are discussed exhaustively and priorities based on those challenges agreed on” .
4.13.2 Familiarity of budget conference participants with the budget process
§ The performance of the previous year
While knowing people’s needs and expectations would be guaranteed, it emerged from the responses that not all participant were well conversant with the budget process. This is especially so for the public, representatives from civil society and councillors.
This limited knowledge ought to be taken as a matter of concern. This is because ordinarily they should know since they represent certain interests in the budgeting process.
However, some of the participants were fully aware of what goes on in the budget conference. In general terms, this is how they understood what goes on at the conference. In the budget conference, first there is a report by the Chief Administrative Officer on the performance of the district in the previous or on- going financial year. This gives the participants issues to articulate at the conference.
The people of Kabale now understand why they actually attend budget conferences. They talk about performance of the previous year, of that particular year and they know what actually has been proposed at mid term review. This is because there is feed back after the priorities are received and determined.
Figure 13: Familiarity of BC participants with the budget process
4.13.3 Awareness of local and international supplements
The NGO contribution is taken seriously in Kabale district. At the sub-county, there is a Coordinator for NGO funds. However, from the study, donor funds have not directly gone down to the sub-county but through the district. What is important however, that is the district and the sub-county plan together for the funds, which end at the sub-county.
One respondent asserted, “Donor funds have got some strings attached and right now there is no capacity at the sub-county to handle then without involving the district. In the next national budget they have proposed what we call rural development. And we are going to pick one sub-county to pilot this strategy such that we gradually build capacity” . Capacity may be easy to build since now sub-county chiefs are University graduates and the Accounts Assistants are diploma holders in Accounting. At the same time, most extension workers are university graduates.
With improved capacity, the government will be able to extend donor funds to the sub-county. Actually, under this modality, research revealed that even the funds coming from the central government, which are normally divided from the district level, are distributed to sub-counties. However, there are plans for the central government to begin releasing funds to the Sub-counties directly in the near future.
It is important to highlight at this moment the fact that donor and NGO funds may in essence not help the population if they are not channelled through the mainstream of the budgeting system. In some cases, donors and non-governmental organisation manage their funds themselves without involving the local government staff. This in some cases has caused disharmony among the staff that are not working on the donor project side. As a reaction, donors have created situations of better performance and accountability of their own projects, with top-ups for project staff and strict rules for procurement, accounting and auditing.
It is also possible that if the NGOs do not work hand in hand with the district and other local government, their intervention will not generate any marked impact. This is because either it will not be properly aligned, or it will just lead to duplication of efforts.
4.13.4 Options available for the sub-county
Besides, funds other than those from the government are normally incorporated into the whole budget during the budgeting process. This is because in the budgeting process the donors commit themselves in taking care of particular projects.
4.14 Budget Approval
4.14.1 Understanding budget approval
From the field responses, budget approval happens at all levels of budgeting. For instance, it starts from the budget desk. After the budget conference, the budget desk organises the information in the right format. At this point some things, which are not in line with the policy, are dropped.
From the budget desk, it goes to standing committees, which make their input leaving some things out as a matter of course. Then to the executive committee which also removes some things and adds others depending on the policy of the day.
From the executive committee, it goes back to the budget desk to incorporate the input of the executive committee and the standing committees. It is at this point it is taken to council for consideration and approval. This whole cycle is of approval except that the powers are not the same at every level.
Because of the vigilance of the process as described in the foregoing paragraph, by the time the budget reaches the council, it is very easy to pass. A lot of effort and work is put in at all the levels indicated. When it goes to the plenary of council, it is only read and then they go with their copies. After the second presentation, there is a day for discussion and a day for approval. Unlike in the past when debates were problematic resulting from inadequate involvement, currently every person in standing committee is fully involved.
4.14.2 Budget presentation
Asked if participants are often satisfied with the way the budget is normally presented at the approval stage, 14 out of the 18 respondents showed satisfaction with the presentation as indicated in Figure 9. The understanding was that technical people were often available to explain what was in the budget. However, those who did not like the presentation still cited use of technical language that was hard to comprehend by the rest.
Asked to give suggestions on what should be done to improve budget
presentation and approval, respondents suggested the following:
4.15 Sectoral committees
4.15.1 Role of sectoral committees
The role of the sectoral committee was identified as to determine and
prioritise sectoral needs and push for their adoption into the overall
budget among. Besides, the committee is not only charged with the
development of the sectoral budget but it also has the responsibility of
overseeing implementation of activities in their sector. Other
The sectoral committees were considered by all the respondents to be doing their work well since their activities and inputs have always been felt in the budget process. Sectors control their budgets. Each sector has a decentralised accountant to handle all financial matters at that level. What finance does through the Chief Finance Officer is only to sanction payments and forward to the Chief Administrative Officer. The initiation of payments is done by the sectors themselves.
Sectoral committees check and balance the executive. Currently, the amended Act gives more powers to the executive committee, but in the past, the sectoral committees were the ones that used to decide the budget priorities, which would be upheld by the executive committee and approved by council. The sectoral committee’s panel meet and agree to the priorities, which are subject to change by the executive. The amended Act reduced the powers of the sectoral committees by vesting the authority of budget approval in the executive committee.
4.15.2 Problems faced by sectoral committees
Figure 16: Problems faced by sectoral committees
One participant had the following to say about the committees, “… members have little time to look at all this because they are limited by the number of times they have to sit in a year. Therefore, what these committees normally face is the limited time to discuss all these issues. Because you know after discussing all those committee inputs then everything is supposed to go to the finance committee which looks at all of them but they normally have limited time and very limited reference to the available technical information to help them take that decision” .
There is also a problem of conditional grants. At the local level, the participants are more of implementers of decisions of central government. There is no flexibility. They can only use the conditional grant for the purpose it has been released. The fiscal decentralisation strategy (FDS) of 10% of recurrent grants is insufficient for reallocation. For example, if a bridge broke, the local level would not decide to use the grant for that purpose.
There is also the issue of compulsory co-funding of projects at the local level. However, limited monetary resources challenge this co-funding. For example, one of the sources of finance for local governments was graduated (pole) tax, which has since been scrapped as a result of political pressure and critics of the modalities for its collection. The only sources of finance are market dues, trading licences, taxi and bus park dues. These are infinitesimal resources and cannot generate funds for co-funding of reasonable projects.
4.15.3 Suggestions on improving sectoral committees’ performance
4.16 The executive committee
4.16.1 Role of the executive committee
Asked if the committee does its work well, 15 out of the 18
respondents were of the opinion that the committee does its work well as
shown in Figure 11.
Figure 17: Performance of the executive committee
4.16.2 Problems faced by the executive committee
According to figure 12, 7 out of the 18 respondents indicated that one of the major problems the committees face is limited funds. Other problems mentioned were, conflicts of personal interests and lack of skills in budgeting as indicated in Figure 12. Respondents also noted that the committee is often overwhelmed with work since they also have their political schedules to address.
Indeed as one respondent noted, “there are only five members and work is too much for them. Despite all their other political schedules, they have to sit and enlarge the policies of the district. Therefore, they have limited time. In fact, most of the time they are very busy and it is even going to be worse because now they are going to be reduced to three.”
4.16.3 Suggestions on improving the performance of the committee
4.17.1 The role of the budget desk
Asked if the committee does its work, all the respondents said it does since the budgets are normally read in time. One of the respondents answered thus, “The committee does its job because we normally pass our budget on time in accordance with the local government Act. In fact, by 15th of June we have the budget presented, by 30th of June already discussed and by the end of July already passed and that is what the Act says.”
Figure 19: Problems faced by the budget desk
Some respondents also noted political interference where projects that may not be feasible, are forced into the budget. In some cases, some politicians may want to introduce into the budget projects that are not feasible given the circumstances. This may end up occupying the budget desk staff explaining to the politicians the limitations and dangers of their proposals.
The other problem that the budget desk has faced for a long time is of compiling and integrating all the information from all the sectors. However, this has been addressed by introducing computer software, which the staff members are trying to get accustomed to. Otherwise, the work has been enormous and tedious.
4.17.3 Suggestions for improving the performance of the budget desk
Respondents made the following suggestions:
4.18.2 The stakeholders in the budget execution process
4.19 Budget appropriation
4.19.1 Understanding the budget appropriation process
Budget appropriation according to respondents is done by the council, heads of department, Chief Executive Officers, Chief Financial Officer, Chief Administrative Officer, investment committee, technocrats and sub-county chiefs.
However, the understanding of this concept by the respondents was not very clear. One respondent noted, “It could be about resource allocation to sectors; what goes to capital development; or what goes to recurrent. I think that is what budget appropriation is about. What comes to my mind is that normally, each sector puts in what it expects. For example on recurrent, management, each month, we need a vehicle to go to Kampala to pick the pay role. Therefore, before we arrive at allocation of fuel to that department, we consider all those transactions and we consider when we come to the revenue side, how much is coming from that department. If they are generating more revenue, we should also give them more resources to facilitate them generate more resources. Therefore, on budget appropriation, I think it is okay, people know how we are generating resources and they know their mandate and the cost of their mandate and the number of staff in that particular department or sector. For capital development, it is very clear we have our priority areas, health and education and then production and water.”
This response indicates how the concept of budget appropriation is not clearly understood. There is need for the participants to be educated about how it works.
4.19.2 Performance of budget appropriation
Figure 20: Freedom to utilize allocated funds
It was noted that the current tendency is to channel funds directly to the sub-counties. This has solved the bureaucracy that used to be an obstacle in the accessing of funds for approved projects.
The local governments’ Act, 1997, which governs local governments, also provides for accountability. Section 87 states as follows: “every local government council and administrative unit shall keep proper books ok accounts and other records in relation thereto and shall balance it accounts within four months from the end of each financial year”.
Accountability is a situation where one has to indicate how he/she used the resources what were released to him/her for use. It must always be done after the resources have been utilised. It must be judicious and expeditious in order to avoid failing to access more resources.
The Chief Administrative Officer does accounting at for the district. Accounting for funds differs depending on the source of funds. There are PMA, NAADS and LGDP funds, which have different accounting procedures and requirements. What is common is that accountability is normally done through monthly and quarterly reports and financial returns. More funds cannot be accessed before the earlier allocation is accounted for. Besides, there is always inspection and monitoring of activities by technocrats. In addition, the chain of command that exists ensures approval is sought from different people before funds are accessed.
Normally, the financial year ends on June 30 of every year. Yet, the budget proposal is ready to parliament mid June as provided in the national constitution (1995). Article 155 says, “The President shall cause to be prepared and laid before Parliament in each financial year but in any case not later than the fifteenth day before the commencement of the financial year, estimates of revenues and expenditure of government for the next financial year.”
Normally, debates of the proposed budget commence late June earliest. Otherwise, it begins in July. The debate continues for even two months. Therefore, if institutions were to wait for the appropriation of the new budget, they would be financially suffocated. This is why vote on account is provided for.
From the research in Kabale, it was established that sometimes the
council delays to approve the budget so that money can be spent at the
district level. This means that the allocated funds would not be
available for use in good time. Departments and sectors respond in
different ways in such eventualities as indicated in figure 15. Majority
of the respondents indicated that in such cases operations or
implementation of projects would be halted. This is attributed to the
fact that such departments entirely depend on government funds. At least
one participant said that they would seek essential services on credit
until the budget is approved while four respondents said their sectors
would have a vote on account in eventualities. However, it was noted
that votes on account do not exceed particular limits.
Figure 21: Options in the event of funds delay
Vote on account can also be occasioned by delay in budget approval. One respondent noted, “now, actually, in the first place, we ensure that they pass their budgets early so that they can avoid the vote on account business. However, in case they delay to pass the budget, actually the issue is not the delay of the money from the central government that may call for a vote on account. The issue is that the council may not have passed the budget for the sub-county chief to go ahead to spend money in another financial year. Therefore, if the budget has not been approved and there is some money on, the account then it can be utilised as vote on account. Otherwise, they are not supposed to touch it. For that to happen, the council sits and passes a vote on account, which is not exceeding 1% so they start spending within those limits as they prepare to pass the budget officially” .
4.23 Supplementary budgets
Figure 22: Possibility of supplementary budgets
For instance if the funds are not enough for the project, the relevant sector writes to the ministry of local government indicating the need for more funds. This might have been because of a unforeseen circumstances or disaster. Then it is the mandate of the Ministry of Finance, Planning and Economic Development to either give more money or not.
Figure 23: Virement
4.25.1 Understanding auditing
Both internal and external auditors do auditing. There are internal auditors at the district level (Principal Auditors and their assistants) the counties also have auditors allocated to them but stationed at the district. External auditors are from the Auditor General who go to audit twice a year. Internal auditing is normally a continuous process mostly before payments are made (pre-audit). Besides, audit reports are made quarterly. External auditor from the Auditor General is normally done annually or when a project is reported complete.
4.25.2 The Auditing Process
The Chief Accounting/Administrative Officer and the Town Clerk initiate internal auditing. Audited reports are also present to the council. Before payments are made one has to pass through internal audit to see whether rules and regulations have been followed. Sometimes the external auditor makes impromptu visits to check books of accounts.
In the case of local governments, pre-audit covers local government development plan (LGDP) projects, plan for modernisation of agriculture (PMA), development account and collection account among others.
Internal auditors normally justify payments of 20-25% of the contract sum in case of LGDP contracts. This can only be done so long as one has an insurance security bond accompanied with all the necessary requirements according to the LGDP 2000 guidelines. The guidelines include, contractual agreement between the contractor and the local government, tender award letter, value added tax (VAT) registration certificate, contract acceptance letter and bank account. These payments must always be by cheque.
Requirement for PMA audits are mandatory for advances up to 20%. The conditions for these contracts are similar to those of the LGDP account. The development account on the other hand handles all revenue collections. Mostly it is for the sub-county administration. Under this account, pre-audits have no percentage limits on advances. Hence, auditors always allow advances up to any amount as long as it is within the budget.
The collection account on the other hand is generally an account
where local revenues are banked before being transferred to the
Development account. When all the revenues are received into the
account, they are shared in following ratios according to the local
governments Act 1997, Section (85):
Out of the 65% that remains at the Lower level council, 5-15% is distributed to villages depending on available fund. From the foregoing, one can analyse that internal Auditors have a lot of leeway to approve payments before they are even executed. This is a good idea in that the contractors are financially facilitated to execute the contracts. However, both the auditors and the contractor can abuse the process. Hence, serious controls need to be established especially for the Development Account.
22.214.171.124 External audit
The major objectives of the audit are
126.96.36.199 Challenges of the external audit function
The other challenge is limited cooperation from the audited entity. Some times they take long to respond to queries raised by the Auditor General in good time causing him to fail to meet statutory mandates for submission of audit reports.
The Auditor General like most government institutions cannot have adequate funds all the time. Hence, he can only afford little facilitation to his staff. This causes delays in operations and demoralises staff. In addition, the Auditor General fails to develop value for money audits because of funding inadequacies.
It has been observed over time that Auditor General’s audit reports are some times produced in arrears with backlogs. This affects the implementation of the recommendations proposed in the reports. For example, recovery of funds from former employees may not be possible in case some of them may have died. Others may be incapacitated and therefore unable to repay. The current debates of the PAC are evidence of a delayed report. Most of the reports under discussion currently are of 2002/3 Financial year. The central government should find ways of ensuring capacity building of the Auditor General to enhance his capacity to operate efficiently.
The budget process in Uganda begins in September with the national
budget conference and ends in mid June or earlier with the approval of
the budget proposal. The following specific conclusions are made:
The study has come up with the following specific recommendations:
1. The study established how local governments are involved in the
budgeting process up to some point. However, it is eminent that there
are limitations in conceptualization of budget issues at the lower
levels. Therefore, a study should be commissioned to investigate how to
involve gainfully the Local Communities in the budgeting process from
the beginning to the end.
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