AG Auditor General
BCC Budget Call Circular
BFP Budget Framework Paper
CAO Chief Administrative Officer
CEO Chief Executive Officer
CFO Chief Financial Officers
CMBES Community Based Monitoring and Evaluation System
DDP District Development Project
FDS Financial Decentralisation Strategy
FY Financial Year
GAO General Accounting Officer
GDP Gross Domestic Product
HIPC Heavily Indebted Poor Countries
IDPs Internally Displaced Persons
IGG Inspector General of Government
IPF Indicative Planning Figures
LC3 Local Council 3
LC4 Local Council 4
LC5 Local Council 5
LG Local Government
LGBFP Local Government Budget Framework Paper
LGDP Local Government Development Plan
MFPED Ministry of Finance Planning and Economic Development
MOLG Ministry of Local Government
MTBF Medium Term Budget Framework
NAADS National Agricultural Advisory Development Services
NGO Non-Governmental Organization
NPA National Planning Authority
OOB Output Oriented Budgeting
PA Priority areas
PAF Poverty Action Fund
PDM Participatory Development Management
PEAP Poverty Eradication Action Plan
PMA Plan for modernisation of Agriculture
PPA Priority Programme Areas
PRSP Poverty Reduction Strategy Paper
SFG School Facility Grant
SPSS Statistical Package for Social Sciences
SWAPs Sector Wide Approaches
SWG Sector Working Group
UPE Universal Primary Education
USA United States of America


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.

Sign. ..............................................................................

Maurice Alex Muhwezi-Murari

Date .................................................................


This dissertation has been submitted with my approval as the supervisor.


Prof. Dr. Jeff Wooller
Institute for Professional Finance Managers (IPFM)
United Kingdom

Date ...........................................................


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.


First, I would like to thank my supervisor, Prof. Dr. Jeff Wooller for his constant advice, encouragement, challenges, guidance and availability whenever I needed him. Prof. Wooller has been very critical of my work since we started working together. This critique has sharpened my analytical skills and helped me to improve my use of the English language in writing.

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.

Table of contents
Table of contents vii
Table of figures x
List of tables x
Chapter 1.0 Introduction 1
1.1 Background to the study 1
1.2 Description of the Study area 6
1.3.0 Conceptual framework of the budgeting process in Uganda 10
1.3.1 Budgeting at the national level MFPED / MOLG / NPA 12
1.3.2 Budgeting at the district level 13
1.3.3 Budgeting at the sub-county level 14
1.4 The problem statement 15
1.5 Aim of the study 16
1.6 Objectives 17
Chapter 2: Literature review 18
2.1 Budgeting process 18
2.2: Budget approval 20
2.3 Accountability and auditing 21
2.4 Poverty Action Fund 23
2.5 Timing of the budgeting cycle 24
2.6 What budgeting is 25
2.7 Influence of politics in budgeting 29
2.7 Budgeting process 30
2.9 How the new trends have affected the budgeting process 32
2.10 Budget estimation 35
2.11 Derivation of Indicative Planning Figures (IPF) 36
2.12 Stakeholders involved in the generation of indicative-planning figures 37
2.13 Challenges they face 40
2.14 Successes of stakeholder involvement 41
2.15 Donor and Non-governmental (NGO) funding 42
2.16 Supplementary funds 45
2.17 The role of sectoral committees 47
2.18 Budget execution 49
2.19 Virement 50
2.20 Central government transfers 53
2.21 Some limitation in local government budgeting cycle 54
2.21.1 Delays 54
2.21.2 Budget cuts 55
2.21.3 Variance between budget and allocation 56
2.21.4 Technical efficiency 57
2.21.5 Medium term expenditure framework (MTEF) 58
Chapter 3: Methodology 59
3.1 Introduction 59
3.2 Research design 60
3.3 Study area and population 61
3.4 Research methods 63
3.4.1 Primary data collection 63
3.4.2 Library and desk research 64
3.5 Instruments of the research used 64
3.6 Sample size 65
3.7 Data transcription 66
3.8 Qualitative data analysis 67
3.5 Quantitative Data Analysis 68
Chapter 4: Results and discussion 70
4.1 Background 70
4.2 The budget process 71
4.3. Budgeting estimates 72
4.4 Steps involved in the budgeting process 73
4.4.1 The national budget consultative meeting 73
4.4.2 Planning process at the sub-county 74
4.4.3 The budget conference 74
4.4.4 The sectoral/standing committee 75
4.4.5 The sub-county executive committee 75
4.5 Availability of human resources to handle budgeting process 78
4.6 Influence of misappropriation of funds on budgeting process 83
4.7 Influence of politicians on the budgeting process 84
4.8 Understanding of budget estimates 88
4.9 Preparation of budget estimates 90
4.10 The indicative planning figures 91
4.11 How the indicative planning figures are got 92
4.12 Stakeholders in the generation of these indicative planning figures 94
4.12.1 Stakeholders’ expected contributions 94
4.12.2 Stakeholders in the generation of indicative planning figures 96
4.12.3 Challenges in the Generation of Indicative Planning Figures 97
4.12.4 Successes that have enhanced generation of IPF 99
Success 99
4.12.5 Budget call circular (BCC) 101
The following elements contained in the budget circular were mention: 102
4.12.6 Sending and receiving of the budget call circular 105
4.12.7: The time of the year the budget call circular (BCC) is sent out 107
4.12.8 Recipients of the budget call circular 110
4.12.9 Expectations of budget call circular recipients 110
4.13 The budget conference 112
4.13.1 Understanding of the budget conference 112
4.13.2 Familiarity of budget conference participants with the budget process 114
4.13.3 Awareness of local and international supplements 115
4.13.4 Options available for the sub-county 117
4.14 Budget Approval 118
4.14.1 Understanding budget approval 118
4.14.2 Budget presentation 120
4.15 Sectoral committees 122
4.15.1 Role of sectoral committees 122
4.15.2 Problems faced by sectoral committees 123
4.15.3 Suggestions on improving sectoral committees’ performance 125
4.16 The executive committee 126
4.16.1 Role of the executive committee 126
4.16.2 Problems faced by the executive committee 128
4.16.3 Suggestions on improving the performance of the committee 129
4.17 The budget desk 130
4.17.1 The role of the budget desk 130
4.17.2 Problems faced by the budget desk 131
4.17.3 Suggestions for improving the performance of the budget desk 132
4.18 Budget execution 133
4.18.1 Understanding of budget execution 133
4.18.2 The stakeholders in the budget execution process 134
4.19 Budget appropriation 134
4.19.1 Understanding the budget appropriation process 134
4.19.2 Performance of budget appropriation 135
4.20 Utilisation of funds 136
4.21 Accountability 137
4.22 Vote on Account 138
4.23 Supplementary budgets 140
4.24 Virement (re-allocation of funds within the budget) 141
4.25 Auditing 143
4.25.1 Understanding auditing 143
4.25.2 The Auditing Process 144
4.25.3 Stakeholders in the auditing process 149
4.26 Desired improvements in the budgeting process 149
Chapter 5: Conclusions and recommendations 151
5.1 Conclusions 151
5.2 Recommendations 153
5.3 Areas for further research 154
Bibliography 157

Table of figures

Figure 1: Local government (district) administrative structure 3
Figure 2: Map of Uganda showing Kabale district 5
Figure 3: Budgeting framework 8
Figure 4 Source: Adopted from Williamson 21
Figure 5: The map of Kabale district 47
Figure 6: Steps in the budge process 59
Figure 7: Availability of human resources to handle the budgeting process 61
Figure 8: Influence on budgeting process through misappropriation of funds 65
Figure 9: Ways in which the politicians can influence the budget process 66
Figure 10: What budgeting estimates entails 69
Figure 11: Time when budget call circular is sent / received 82
Figure 12: Expectations of budget call recipients 86
Figure 13: Familiarity of BC participants with the budget process 89
Figure 14: Availability of options for sub-counties 92
Figure 15: Satisfaction with budget presentation 94
Figure 16: Problems faced by sectoral committees 97
Figure 17: Performance of the executive committee 99
Figure 18: Problems faced by the executive committee 100
Figure 19: Problems faced by the budget desk 102
Figure 20: Freedom to utilize allocated funds 106
Figure 21: Options in the event of funds delay 109
Figure 22: Possibility of supplementary budgets 110
Figure 23: Virement 111

List of tables

Table 1: Administrative structures of Kabale district …………………………………..12
Table 2: Important aspects in the budgeting process ……………………………………61
Table 3: How indicative planning figures are generated ………………………………..77
Table 4: Challenges stakeholders face in generating IPF ……………………………….81
Table 5: Successes that have enhanced the process of IPF………………………………83
Table 6: Adequacy of time between budget finalisation and BCC ……………………...90

Chapter 1.0 Introduction

1.1 Background to the study

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)
It is argued that the Uganda government is very strong in its macroeconomic and budgetary discipline. She developed a country-owned and effective poverty eradication strategy and a robust framework for dialogue with donors. At the same time, she put in place a, constitutional framework that embodies the principles of democracy and the rule of law. This has, provided for substantial decentralisation to elected local governments.

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.
The district administration and politics is arranged in a hierarchical fashion from the first to the fifth level. Figure 1 below is an illustration of the local government administrative structure:

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 committees namely:
‧ Education and Health
‧ Finance Planning and Administration
‧ Production and marketing
‧ Community based services
‧ Works and natural resources

1.2 Description of the Study area

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.

Figure 2: Map of Uganda showing Kabale district

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.

Table 1: Administrative structure of Kabale district
County Sub-county Parishes Households
Kabale Municipal Council 1. Central 4 3497
2. Northern 4 2614
3. Southern 4 3320
Sub total 12 9431
county 4. Buhara 7 4898
5. Kaharo 6 3635
6. Kamuganguzi 7 5093
7. Kitumba 5 3406
8. Kyanamira 7 3976
9. Maziba 6 3627
10. Rubaya 8 6844
Sub total 46 31,479
Rubanda county 11. Bubare 8 9016
12. Bufundi 7 6544
13. Hamurwa 6 5437
14. Ikumba 7 6877
15. Muko 7 7620
Sub total 35 35,494
Rukiga county 16. Bukinda 6 3863
17. Kamwezi 6 4809
18. Kashambya 6 5006
19.Rwamucucu 7 4989
Sub total 25 18,667
District Total 118 95,071
Source: 2002 population-housing census

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.

1.3.0 Conceptual framework of the budgeting process in Uganda

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.

Figure 3: Budgeting framework

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.

1.3.1 Budgeting at the national level MFPED / MOLG / NPA

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

Lower levels of government, most notably the sub-counties, have fewer service delivery responsibilities. They mostly serve as administrative units for purposes of liaison with the communities and for tax collection purposes. However, under fiscal decentralisation (FDS), capacity is being built to have all sub-county disbursements done directly to sub-counties without passing through the district. However, locally generated revenue by sub counties can be used according to the work plan approved by sub-county respective councils. For the funds received from the district, accountability is submitted to Chief Administrative Officer for consolidation and verification before being submitted to the central government.

1.4 The problem statement

For government at all levels, budgets are necessary and have been developed every year as planning and management tools in the Uganda government and its departments. Various writers have held the Uganda government in very high esteem for being disciplined in budgeting and budget management. However, clear as the process might look, the likely limitations, which may impede effective budgeting and budget execution needed to be investigated.

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.

For the budget process to be effective, it is necessary to have a strong legal structure. It was necessary to establish how strong the legal structure of Uganda is in enforcing accountability in accordance with the approved budget.

1.5 Aim of the study

The main aim of the study was to take stock of the budgeting process in Uganda and the limitations thereof, the policy ramifications of budgeting and the role all the participants perform at the various levels. The study also aimed at the following:
(i) To assess the manner in which budgeting is done.
(ii) To assess the contributions of every stakeholder especially at community level.
(iii) To determine the extent to which the process of budgeting and budget execution conforms to the laid down procedures and regulations.
(iv) To assess the level of effectiveness and efficiency of the budget execution. The study generated theoretical and empirical evidence and contributed to a better understanding of the budgeting process in Uganda. It also uncovered the limitations and strengths thereof and made recommendations for improvement.

1.6 Objectives

1. To establish the factors which influence the budgeting and budget execution.
2. To assess the extent to which the various stakeholders influenced the budgeting process and budget execution process
3. To generate recommendations for improving the budgeting process

Chapter 2: Literature review

2.1 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

The role of budget approval lies with the legislative bodies. According to Lee and Johnson 1998, (p. 50), “the struggle over the budget has only begun when the budget document goes to the legislative body” for approval. Many considerations are used in the approval of budget proposals. Available literature has given some of the parameters as follow: legislative characteristics, economic environment, previous decisions, representation of interests and legislative apportionment among others.

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.

2.3 Accountability and auditing

The final stage of the budgeting process is the audit. This is the stage where accounting procedures are prescribed and auditors check the books maintained by audit personnel. These procedures are known to the accounting officers and their personnel before they are given the money to use. In this case, no one should have an excuse for not following the set procedures because they are in place. According to the procedures, accounting is usually based on the budget lines. Hence, auditing is meant to confirm that actually the funds were put to the intended use. (Lee and Johnson p.52).

“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.

2.4 Poverty Action Fund

In 1998, Uganda first benefited from the Heavily Indebted Poor Countries (HIPC) initiative, and the Poverty Action Fund (PAF) were formed as a means of allocating the additional funds from debt relief and donor budget support towards the new priority programmes in the Poverty Reduction Action Plan (PRAP), as well as protecting the disbursement of funds to those programmes. The Poverty Eradication Action Plan (PEAP) was revised in 2000. This served as Uganda’s Poverty Reduction Strategy Paper that helped it qualify for a second tranche of debt relief under the enhanced HIPC initiative. (Evaluation of the Uganda country strategy 2000-2003, page 3.)
With regard to Poverty Action Fund (PAF), Uganda provides an interesting experiment in implementing monitoring that may open opportunities in other countries. In 1998, the Uganda government established a poverty action fund (PAF) as a mechanism to target, protect and monitor funds released by the HIPC initiative and donors for poverty programme. The PAF does not operate as an extra-budgetary fund, but it is integrated into the budget. The fund involves civil society organisations in the selection of projects and in monitoring the impact of PAF expenditures by allocating 5% of the fund to sustain monitoring activities. (Krafchik, unpublished, P. 16.)

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.

2.5 Timing of the budgeting cycle

The national budget process, led by the Ministry of Finance Planning and Economic Development (MFPED), runs from October to the reading of the budget in June. The Process is consultative involving several stakeholder conferences. These conferences involve local governments, civil society and donors, and central government ministries and agencies. In 2001, a new budget Act was introduced which involves Parliament more in the Budget formulation stage than before.

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 & Johnson. 1998)
It is not clear from the foregoing whether the timing is sufficient for completing the budgeting process. In some cases, rushes are experienced in attempts to ensure they cope with time. It is therefore necessary for a thorough study of the budget cycle timing. It is the contention of this study that the cycle should start earlier.

2.6 What budgeting is

Many authors have attempted to define a budget in a manner that they perceive it. For this study, a few will suffice. According to Bhar (1967 P. 195) “A budget is a predetermined statement of management policy during a given period which provides a standard for comparison with the results actually achieved”. Chandan (1987, P.320) on the other hand defines a budget as, “… a quantitative statement of the plan and operational results for a specified period of time in the future, most typically a period of one year. It is a financial plan outlining how funds will be spent in a given period of time and how these funds will be obtained.”

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 budgeting, agencies and organisations begin by assessing their progress and considering which programme revision to make. They also consider whether to recommend new programmes.

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

“The population phase … in the budget cycle is replete with political consideration, both bureaucratic and partisan in addition to policy consideration. Each original unit is concerned with its survival and advancement. Line agencies and their sub units attempt to protect against budget cuts and may strive to increase resources. ... All members of the executive branch are concerned about their relapse with the legislative branch and the citizenry. The chief executive is particularly concerned about partisan calculations. Which alternatives will be alternatives to his or her political party?” (Lee and Johnson 1998, P. 48).

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)

2.7 Budgeting process

Uganda has a decentralised system of government with local governments responsible for the implementation of many government services. However, fiscal decentralisation has not followed yet. Over 90% of local government funds come from central government grants and there has been a recent collapse in local revenue collection. However, what is critical is whether the decentralised local governments have enough workforce to handle the process. At the same time, the population is involved in a way in the process. However, it is still difficult for every one to make useful contributions because of the various limitations. (Williamson, 2003, P. 9)

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.

2.9 How the new trends have affected the budgeting process

Williamson 2003 (p. 7) argues correctly thus” …the rapidly expanding government of Uganda budget… can be largely attributed to the formation of PAF and SWAPs, and the significant increases in donor inflows that they generated (tax revenue has remained stable as percentage of GDP). “There has also been a substantial reorientation of allocations within sectors towards pro-poor expenditures. Whilst overall allocations to the health, education, water, roads and agriculture sectors have only increased from 39% of the budget in 1997/8 to 47% in 1998/9; the proportion of those sector budgets going to PAF/ pro-poor service delivery increased from 43% of the sector budgets to 66%.” (Williamson, 2003, P. 7)

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.
The continued donor support demonstrates the confidence the donors have in Uganda’s own PEM system initiatives such as SWAPs and PAF contributed towards this; however, there is now concern that PAF /SWAPs may have over skewed budget/ MTEF allocations towards direct provision of services relative to her sectors and that the budget deficit is too high and unsustainable. This led to the Ministry of Finance Planning and Economic Development limiting the growth of expenditures in the budget/MTEF despite the possibility of increased donor funding. (Williamson, 2003 p. 8)

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

“Although the process focuses throughout on medium term planning and budgeting, sectors and agencies tend to focus their efforts on increasing the following year’s budget allocations, as there is a perception that sector Ministry ceilings are flexible, if sufficient time is spent lobbying MFPED and cabinet. The SWG and BFP reports and central government agencies budget submission are discussed at ministerial level in consultations with MFPED. Individual central government agencies within each sector are required to produce budget estimates on the basis of intra-sectoral allocations agreed at the ministerial consultations.” (Williamson, 2003, p. 6)

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.

2.11 Derivation of Indicative Planning Figures (IPF)

Indicative planning figures are critical in the budgeting process. This is because they indicate what is available for spending in the coming fiscal year. However, the manner in which IPFs are generated should be of interest to students of budgeting because they affect the subsequent budgeting process. Looking at how the various interests may influence the generation of these figures is critical as it affects their accuracy and purpose. Some students have attempted to explain the generation of IPFs as seen hereunder.

“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.

2.12 Stakeholders involved in the generation of indicative-planning figures

According to the literature available, in Uganda, there is a participatory system of budgeting. For example, Williamson on page (9) contends that, “Local governments are required to conduct a participatory planning and budgeting process involving all levels of local governments starting from the village through the sub-county and then the district. The main planning tool at the sub-county and district is the three-year rolling local government plans. The district development plan is composed of an amalgamation of lower level local government plans. In most cases these plans are not resource constrained and do not use performance indicators systematically, though they tend to be very systematic”.

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.)
However, much as the population to some extent are involved, it was important to note some of the limitation of that participation. For example, most of the literature available is in English language. Therefore, people who do not understand the English language will neither comprehend the issues under debate nor make any useful contribution to the debate. Secondly, presentations take a technical stance, which may not be easy even for some people who may know English understand and make useful contributions to the discussions.

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.
The expression budget transparency “encompasses an entire ethos of financial decision-making and implies a state of affairs in which stakeholders can "see into" and understand key aspects of the budget process, as opposed to one in which decisions are made and actions taken behind an opaque curtain. In a non-transparent system, corruption is more likely to occur and decisions are more likely to be made without taking stakeholder interests into account. …” (Folscher and Krafchik, Unpublished, 1999, p. 1 and Robinah Rubimbwa Unpublished).
In the same breath, Kandyomunda (2003) explains how promoting transparency in budgeting would cause a change. He asserts, “If the budget were open to public and effective legislative scrutiny, there would be less scope for deviation from policy decisions and reversal of budget allocations. There would probably be fewer distortions between the sub-sectors and the ruling elite would be less likely to manipulate the budget”. (P. 1)
What this argument does not highlight is the fact that most of the population in the country especially at the lower levels of the community are illiterate and not capable of participating fully in the budgeting process. The discussion should have acknowledged the level of participation reached so far. However, the researcher agrees with Kandyomunda when he argues that a budget that is not transparent, accessible and accurate cannot be properly analysed. Thorough monitoring of the implementation of such a budget becomes difficult. Its outcomes cannot be meaningfully evaluated either.
Good governance dictates that government open operations and decisions with the active participation of those people influenced by them. The budget is the primary economic policy document of government and for this reason, transparency and participation in the budget is particularly important. The literature on budgeting in Uganda ponders to the fact that participation is principally upheld in the budgeting process. However, the contention of this study is that there is still need to involve every one at the community level. This will help in generating full consensus of the population. It also gives confidence to the process and the out come.

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

Local governments are required to make cash disbursements. Disbursements from central government though often irregular are protected as they fall under PAF or the resources are provided for under the constitution. Local revenue is far less predictable yet it contributes to the operational budget of a key administrative and some sector departments including education within the district. Often revenue projections are of poor quality (due to either the low technical capacity, political pressure, or a mix of both) cash flow is unpredictable as the majority of the revenue is collected in the last half of the financial year therefore there are problems of salary arrears in local governments, (Williamson op.cit P. 10).
Sector BFPs and LGBFPs should provide detailed budget for salaries and wages clearly indicating approved posts, staff in-post, excess staff, salary scale and levels by department and vote. Any planned recruitment should be indicated and the financial implications stated. It is only when all these details are given that the budget will be realistic. (Williamson, 2003, Roberts, 2003)

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.

2.14 Successes of stakeholder involvement

All the literature about budgeting in Uganda (Bevan, 2000, Bevan & Adam, 2001, Campos & Pradhan (undated) Roberts, 2003, Kayizzi-Mugerwa 2003, Williamson 2003), agrees to the fact that there is a great improvement in the budgeting approach. The biggest success lies in the introduction of the bottom-up budgeting process. For instance, the only grant for which the decision-making is bottom up and does involve the lower level politicians is the local development grant, and there is evidence that it is working.

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

Most local governments apart from the resources from the central government receive earmarked project funds from donors. The use of those funds is tightly earmarked to specific areas of service delivery- projects. These are particularly prevalent in health and water sectors.

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)
However that may be, the recent tendency has been for donors and governments to agree on ‘priority sector’ within the budget with a view to these being privileged in various respects. In several cases, a special ‘poverty fund’ has been developed to channel additional resources to these sectors within the MTEF. For example, in Uganda there is the poverty action fund, originally set up to channel relief by bilateral donors of multilateral debt service, and more recently used as the vehicle for HIPC funds...”(Bevan and Adam p. 23)

“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).
What is evidently lacking in this literature as far as donor funding and non-governmental organisations’ contribution to the national budget is their likelihood to seek to control the process. For example, donors always insist on pre-agreed performance targets and process within agreed periods. However, given the local circumstances, the local governments may fail to meet these targets. These conditions are as good as conditionalities.

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

“Budget discipline in Uganda has been relatively good compared to its peers; however disbursements against the budget can vary significantly between sectors and agencies within those sectors. Aggregate MTBF resource projections have been accurate averaging over 97% of the budget resources since 1997/98, and these are disbursed through Uganda’s cash budgeting system that is backed up by a manual accounting system whilst other programmes within the MTBF may be subject to cuts due to the resource availability during budget implementation. Government of Uganda commits to the funds budgeted for PAF programmes being available over the financial year. Powerful votes especially within the public administration sector are prone to overspending against the budget and this is facilitated through the application for and approval of supplementary expenditures. This means that those institutions that are neither within PAF nor politically powerful are exposed to greater resource cuts and irregular disbursements”. (Williamson, 2003, P. 8.)

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

Williamson, 2003 explains the role of sectors in the budgeting processes in Uganda. On P. 73, he asserts as follows: “The use of targets and results in the planning and sector budgeting process is an evolving one in Uganda. It has come on a long way and has added significant value to public sector management systems and processes. Results are increasingly imbedded into cross sector and sector wide planning and have undoubtedly improved the allocation of resources towards PEAP objectives, both within and between sectors. However, implementation has been haphazard and has not been comprehensive”.

“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).
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 of local governments to catch up thus reducing the disparity of sector outputs within the county.

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

According to Lee and Johnson (1998), execution is the “action phase … in which the plans contained in the budget are put into operation” (P. 265). It involves apportionment and allotment of financial resources to the various sectors and projects. It is also observed that during budget execution, several sub-systems are in operation. Taxes and other debts to government are collected. Funds are managed in the sense that the monies temporarily not needed are invested.

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.

2.19 Virement

There has always been substantial reorientation of allocations within sectors towards pro-poor expenditures. It is difficult to see how some sector allocations will be reduced to create room for increases in demanding sectors, enabling them to achieve their sector targets. Instead there is a danger that the budget process will be reduced to one where sectors try to focus on soliciting more resources from MFPED the following year.

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.

2.20 Central government transfers

The unconditional grant is transferred to local government for allocation to the respective priorities, while taking into account the national priorities. As provided under the constitution, the conditional grant is composed of two parts, the wage and non-wage component. The allocation of the grant to the local government is based on structures by the ministry of public service, the population and the geographical area.

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.

2.21 Some limitation in local government budgeting cycle

There are a number of limitations in the budget execution process in the local governments at all levels. They include but are not limited to the following:

2.21.1 Delays

Delays in action have been a bottleneck for a long time in the fiscal history of Uganda. Campos and Pradhan in their paper inform us how Uganda had continuing sporadic problems with aggregate fiscal discipline since initiating reforms in 1987. This in essence resulted in delays in the disbursements of donor assistance. This went on until adjustments to bring the programme back on track with the IMF-World Bank targets were made.

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

The other major limitation in the budgeting process is what is termed as budget cuts. Campos and Pradhan observed, “… whatever expenditure allocations are made in the budget, they are further undermined as drastic expenditure cuts are made in an arbitrary and non-transparent manner during budget implementation …” The authors highlight “over optimism in the macroeconomic framework and its related resource envelope, reflecting donors’ internal incentives to show ambitious fiscal targets in order to get loans approved as well as the ministry of finance interests in deferring an upfront battle on expenditure priorities” . (Sic)

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

The other limitation worth noting is the variance more often negative variance that occurs in the budget fund allocation. “… actual expenditure allocations are often at large variance with budgeted priorities, undermining the legitimacy of the formal budget process. In Uganda for instance, large amounts of supplementary expenditures have been incurred by powerful ministries…” (Campos and Pradhan, P. 30).

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 technical workforce is too small to handle the process effectively. In addition, “poor incentives for civil servants to deliver public services resulting from very low salary levels, poor definition of responsibilities as well as a lack of credible accountability mechanisms – constitute the most serious obstacle to achieving a minimum level of technical efficiency. (Campos and Pradhan, P. 30)

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)

Williamson (2003, p. 3) tells us that 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 in 1995. The development of the MTEF was strongly linked to the budget process.

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”.

Chapter 3: Methodology

3.1 Introduction

The purpose of the study was to get an in-depth understanding of the budgeting process at local government level. This was mainly at district, municipality and sub-county levels. This was done with a view of identifying challenges and drawing lessons for smoothening the budgeting and budget execution process.

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 study employed a qualitative research design. It aimed at generating and analysing qualitative data about how budgeting in the local government is done and the limitations therein. The study generated a critical examination in the budgeting process in the local governments in Uganda following decentralisation. This was to analyse and explain the benefits and limitations of involving local levels of government in the budgeting process and budget management in local governments in Uganda.

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.

3.3 Study area and population

The study was carried out in Kabale district in Western Uganda in three selected sub-counties. The sub-counties were Kaharo, Bubare and Kabale Municipality. Figure 5 below is a map of Kabale showing the district administrative structures.

Figure 5: The map of Kabale district

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.

3.4.2 Library and desk research

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 researcher also accessed literature from textbooks bought from bookshops as well as internet sources. Magazines, reports and newspapers were also utilised. These sources provided relevant data related to budgeting and the limitation thereof.
3.5 Instruments of the research used

The researcher utilised the individual in-depth interview guide for data collection with specific designed questions aimed to meet specific objectives.

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.

3.6 Sample size

Purposive sampling was used to select 25 respondents to constitute the sample size. The basis of selection was the assumed involvement in the budgeting process at the three different budgeting levels namely; district, municipality and sub-county levels.

Of the selected sample, 18 in-depth interviews were conducted with the following officials:

District level: The following people were purposively selected:
a) Senior Economist for Kabale district
b) Chairman of Civil Society organizations in Kabale
c) Secretary for finance and planning
d) Businessman, and
e) Senior Finance Officer

Municipality: The following officials were selected:
a) Representative of the elderly in Kabale Municipality
b) Secretary for Health and Education
c) Councillor, Kabale municipality
d) Representative of women
e) Assistant Chief Administrative Officer
f) Chief Finance Officer

Sub-county level: The following people were selected:
a) Opinion leader/ Adviser
b) Sub-county chief
c) Veterinary Officer and NAADS Co-ordinator
d) Local council 3 Chairperson of Bubare sub-county
e) Engineer
f) Sub-county Advisor, and
g) Church worker

The actual data collection exercise was conducted in the month of May 2006.

3.7 Data transcription

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.

3.8 Qualitative data analysis

The cross-case analysis approach (Miles and Huberman, 1994) was employed to analyse data derived from the in-depth interviews. Cross-case analysis is a process of describing, understanding, and explaining what happens across multiple cases, as opposed to within a single, bounded context. The main aim of studying multiple cases is to see processes and outcomes across many cases, to understand how they are shaped by local conditions, and thus develop strong descriptions and explanations.

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.
The variable-oriented approach covered a wide variety of cases, looking at the broad, general patterns found across these 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.

3.5 Quantitative Data Analysis

Quantitative data was analysed using the Statistical Package for Social Sciences (SPSS). This package has the advantage of allowing the researcher to quantify qualitative data. This made it easier to organise and summarize the data into tables and graphs. SPSS enabled in the generation of frequencies of responses to enable capturing the number of times the various responses were given.

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:
Question: How are indicative planning figures generated?
Response: Code
Based on parameters e.g. population 1
Generated by central government 2
Based on taxes 3
By technocrats 4
Do not know 5
Data analysis involved mostly the use of univariate descriptive statistics, that is, frequency distribution tables and bar graphs. These statistics form the best way of organising and summarising data. The distribution of responses to specific questions is shown clearly in this type of statistics. The use of bar graphs was to provide a visual picture of the distribution of responses to each item. Cross tabulation was also used to relate two variables with a view of establishing any association among such variables.

Chapter 4: Results and discussion

4.1 Background

This study was carried out in Kabale district located in the south-western part of Uganda with a view of critically analysing the budgeting process and budget execution procedures. In this chapter, results are presented and discussed.

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 budgeting process.

4.2 The budget process

From reports and literature, the researcher established that there are budgeting at all local government levels. However, he was not sure of the process and its management. The study therefore generated an understanding of the budgeting procedures and budget execution management at the local government levels.

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
1. Planning 9
2. Costing of activities/projects 8
3. Identification of activities/needs/projects 7
4. Prioritising activities 4
5. Continuous process 3

Table 2: Important aspects in budget process

Therefore, the general understanding is that budget process is a continuous planning process that involves identification, prioritisation and costing of projects or activities.

4.3. Budgeting estimates

Budgeting process in general terms entails general planning and estimating the required resources to execute the cost estimates. It is about generating indicative planning figures that help in determining the resource base required for the period. The budgeting process starts from a certain month and takes a number of months to be completed. Hence, it is a cycle.

4.4 Steps involved in the budgeting process

4.4.1 The national budget consultative meeting

The process begins in September or October of each year with the national budget consultative meeting, which draws together all planners; all Chief Administrative Officers (CAOs) and officials from all line Ministries. The meeting brainstorms on plans and objectives of all line Ministries.

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

The planning process begins at the village level based on the indicative planning figures received. In the village meetings, priorities are identified and submitted to the parish, which consolidates the priorities from various villages for submission to the sub-counties. The sub-county compiles a consolidated list of priorities from parishes. It sieves out what it can implement using own collected funds and forwards the rest to the district.

4.4.3 The budget conference

A budget conference is then held at the district level. The following people attend the conference: district councillors, district technical staff members, sub-county chiefs, opinion leaders, representatives of non-governmental organisation. The others are members of parliament from the district and representatives of donors.

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.

4.4.4 The sectoral/standing committee

At the standing committee, the summarized inputs are prioritised based on the sectoral needs. The prioritised list is then sent to the district executive committee for further inputs.

4.4.5 The sub-county executive committee

This committee studies the recommendations and prioritisation and makes the necessary adjustment before sending it back to the budget desk for production of the draft annual budget, which the executive forwards to the plenary of council. The budget desk, which is composed of technocrats, carries out further analysis and costing of the priorities.

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 3 below shows the budgeting process.

Figure 6: Steps in the budge process

The MFPED compiles sector wide group (SWG) reports into a budget framework paper (BFP), which is presented to cabinet for approval. Cabinet considers and approves BFP and submits it to parliament after satisfying itself that these are the proposals they would like to present for further approval. Overview of the sector policies and objectives constitutes the first section of the medium term.

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

Availability of human resources to handle the budget process is not uniform across the board. According to Figure 2, 12 out of the 18 respondents believe that the human resources to handle the budget process is available while 4 out of the 18 respondents felt that the human resources are not enough to handle the budget 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.

The human resources are very limited. They are very few people employed and yet, the work they do is not limited to budgeting. Budgeting is just one of their assignments. Therefore, both the central government and the local governments should find a solution for this limitation.

Figure 7: Availability of human resources to handle the budgeting process

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.
It is fair that councillors fully participate in the budgeting process as dictated by principles of good governance. This in itself indicates high level transparency in budgeting which is a basic economic policy document therefore the population represented by their political representatives should participate.
However, being politicians does not necessarily mean that they fully understand the technicalities of budgeting. Hence, for them to make usefully transparent participation, they need some training. They need training not only in budgeting but also in advocacy. They need advocacy because budget appropriation is done at Parliamentary level.
Members of parliament where accessible need to be cautioned on the budget issues they should expect in the debate. Members of parliament need to be lobbied with a view of convincing them to support their causes. They also need to understand how to persuade central government technocrats to support in budget releases the good cause that has been expressed in the budget proposals.

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 eradication.
For all this to happen, politicians together with the other stakeholders have to collect and understand sufficient information regarding their situation and their needs. They should try to get sufficient access to information regarding the budget process and budget management. They need to seek to understand the principles that regulate and guide the budgeting process and the possible consequences of failure to follow the regulations. They need to understand that their participation is not only a right, but also a duty that calls for diligence.

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

An overwhelming majority of the participants believe that misappropriation of funds can actually influence the budget process in a number of ways as indicated in Figure 3. One participant pointed out that it was out of this fear that the Community Based Monitoring and Evaluation Systems (CBMES) were established to check such cases. The CBMES is an approach for engaging communities in continuous monitoring and evaluation of government programmes. It is a process aimed at mobilising communities to participate fully and effectively in identifying and monitoring the quality of delivery of public services.

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”.

Figure 8: Influence on budgeting process through misappropriation of funds

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.

Figure 9: Ways in which the politicians can influence the budget process

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.

4.8 Understanding of budget estimates

To gauge the understanding of budget estimates by stakeholders in the budget process, respondents were asked to explain what goes on in budget estimation. A majority of the respondents said that budget estimation is about costing of projects or activities that have been identified and prioritised. A few (4 out of 18) on the other hand believe that budget estimation has to do with allocation of funds to various projects. Only five respondents did not understand what a budget estimate was (see Figure 5).

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

After the councillors have agreed on the priorities, sites, and locations, it is the budget desk to tag the costs to this project. “This is done by the budget desk because when we receive say 500 million for SFG, technocrats guide councillors on what this money can do say build ten sites. Therefore, when they are selecting the location or the sites they would select ten sites. The rest is for the budget desk.”

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.

4.10 The indicative planning figures

The indicative planning figures are normally arrived at during the budget workshop, which normally draws together district leaders in planning and budgeting. The indicative planning figures are then communicated to other levels of the budgeting process. This explains why only one respondent (who is a senior economist) at the district level knew how the indicative planning figures (IPFs) are generated. Majority of the respondents (10 out of 18) were only aware that the central government generates the figures while 17% of the respondents did not know the origin of the IPFs as shown in Table 2.

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 indicative figures.
Table 3: How indicative figures are generated
Understanding of how IPFs are generated Number of Respondents
1. Based on parameter e.g. population 1
2. From central government 10
3. Based on Taxes 1
4. By technocrats 3
5. Don't know 3
Total 18

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.

4.11 How the indicative planning figures are got

According to the findings of the study, one respondent noted, “we get them from ministry of finance and they are usually availed to us during the regional workshops on budgeting, preparation of budget framework paper. Budget framework paper is the first document prepared during November and it is during that time when we clear with budget indicative planning figures because they have to be incorporated in this budget framework paper. Later the budget framework paper is converted into the budget itself, then the budget preparation paper, also restricts the projects you are going to do, capital and recurrent expenditure, so all those later are extracted from the budget framework paper, some information goes to what we call the three year development plan and the budget.”

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 Stakeholders in the generation of these indicative planning figures

Stakeholders in the generation of indicative Planning figures include: Permanent Secretaries, Planners, Chief Finance Officers and the Chief Administrative Officers or at least their representatives and representatives from civil society organizations.

4.12.1 Stakeholders’ expected contributions

There are some issues, which the people from central government may not be aware of at the local government level. Therefore, stakeholders contribute in a way that brings such issues out for inclusion in the figures. Hence, participants take to the workshop some challenges, which affect the performance of sectors. One respondent for example held the view that the central government should allocate more money to Kabale district staff involved in monitoring or project supervision because of its terrain. Kabale district is mountainous and because of that, a lot more fuel is required to move around than in most other districts such as Mbarara.

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:
§ Seeking to persuade decision makers at central and local government levels to set priorities that best meet their needs or those of the constituencies they represent. This is usually referred to as advocacy.
§ Contributing information or perspective to budget decisions. Assessing the extent to which constituency needs have been taken into account in a particular proposed or approved budget.
§ Sharing information, such as budgeted amounts and priorities with their constituencies and colleagues
§ Monitoring achievements of intended outcomes. Calling attention to inefficiency and waste.
In order for what they have proposed to happen, and “in order for each group of stakeholders to perform these roles, they must understand the process and know how they may be a useful part of it. They therefore should have ready access to information on the budget process and on the budget itself, on laws and regulations pertinent to the budget process and their rights, and other data relevant to budget decision making, such as key studies and planning documents”.

4.12.2 Stakeholders in the generation of indicative planning figures

Few respondents knew the stakeholders involved in the generation of the indicative planning figures. However for those who knew the following are listed as stakeholders:

§ 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.
§ Representatives of local authority such as the town clerk and accountants. These stakeholders assist in identification of taxable activities.
§ Civil society representatives. These representatives are useful in pointing out societal needs and priorities.

4.12.3 Challenges in the Generation of Indicative Planning Figures

Table 4: Challenges stakeholders face in the generation of IPF

Challenge Response
1. Limited funds 6
2. Delay in release of IPF guidelines 4
3. Lack of cooperation among stakeholders 2
4. Low literacy level by some stakeholders 1
5. Interference from central government 1
6. Don't know 4
Total 18

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 limitation of resources not only affects the generation of IPFs, but also the implementation of projects. Even when money is released to the Sub-counties, the limitation of resources affects the number of times officers can go there to monitor. Yet, the offices are supposed to visit regularly to monitor the progress. In some cases, instead of going for monitoring three times as required, they go there once.

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.

4.12.4 Successes that have enhanced generation of IPF

Regardless of the above-mentioned challenges, it was generally noted that some successes have been enhanced in the generation of IPF. Top on the list is the implementation of planned activities. This had on one hand motivated the stakeholders to participate actively in the process knowing outcomes of the process would be implemented.
Table 5: Successes that have enhanced the process of IPF
Success Frequency
1. Implementation of planned projects 11
2. Better information flow 1
3. Involvement of more stakeholders 2
4. Decentralize budgeting 1
5. Existence of budget control system 2
6. Development of budgeting software 1
Total 18

At least two respondents also noted that the process has been popularised by an effort to involve more stakeholders. The other success was the development of budgeting software, which has made the work easier. The manual system had been replaced by computer software. This was expected to facilitated and simplify the generation of IPFs.

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)

This is a form of communication that officially kicks off the budgeting process at various levels. The purpose of the circular is threefold:
‧ To request the accounting officers to prepare sector budget framework papers (BFPs) for the financial year and the medium term.
‧ To re-emphasise policy and administrative guidelines for the development of the budget of the next financial year.
‧ To provide indicative three-year medium term expenditure framework papers MTEF ceilings, the first year, which is the basis for allocations of the expenditure estimates for the financial year.

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.
The following elements contained in the budget circular were mention:

a). Indicative planning figures and the resource envelope

The projected integrated donor and government of Uganda resources for the financial year are indicated in the BCC. For example, for fiscal year 2006/7 the resource envelope indicated a figure of which 25% had been earmarked for poverty action fund. It also spells out the exchange rate that would be used against the US dollar, which is some kind of standard. For purposes of uniformity in accountability, the exchange rate is harmonised. The BCC requires the accounting officers to describe their recurrent and development of their integrated vote ceilings based on priority stipulated in the poverty eradication action plan (PEAP) and rural development strategy within the medium term. (BCC, 2005)

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

The BCC indicates the extent of flexibility. The districts actually come in under FDS, which is another improvement in the budget process. In the BCC, the level of flexibility the executive has agreed is indicated, usually 5%. This means the sector would lose 5% of its resource envelop as communicated from the centre. If (for purposes of argument) what was available in IPF was 100 million Uganda Shillings, there would be an agreement on the flexibility level. The people receiving the money may lose say 5% of the allocation, which is about 5 million. This 5 million is put in a pool.

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 spells out the policy issues the budget of the year is to deal with. It may be poverty, disease, ignorance or improvement of the road network. For example, by the time of this research, the senior district planner had received the budget framework paper from Kampala, which indicated that local administration police was no longer a functional local government force. This was a change in policy since local administration police used to be under Uganda police and was hitherto budgeted for accordingly. The change meant that they would be removed from the salary vote. This had to be communicated in the next budget call circular to the prisons human resource officer.
At the same time, the president of the republic of Uganda had promised to raise the primary school teachers’ salaries to two hundred thousand shillings (Ushs 200,000). This had to be communicated to the Human Resource Manager for inclusion in the following budget. In practical terms, the budget call circular puts in context the national and the district policies that will be catered for in the next budget.

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

It was important to note the timing of the budgeting to gauge whether time is available to accomplish the task. In most cases, time is a factor especially when projects have to run and yet there is no money released. However, if this schedule is followed strictly, the issue of delays will not occur.

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.

Figure 11: Time when budget call circular is sent / received

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

It was deemed necessary to ask the respondents when the BCC is received in order to gauge the period it takes. The time it is sent and the time it is expected determine the period available to transact real business. If it is released around November/December, the time should be enough to allow subsequent activities leading to finalisation of the budget process by 15th June every year.

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
Time when budget is received Adequacy of time between circular and budget finalization Total

Adequate Not adequate
December 2 0 2 in 10
November 3 1 4 in 10
September 0 1 1 in 10
June 0 2 2 in 10
May 1 0 1 in 10
Total 6 in 10 4 in 10 10 in 10

Immediately the officials return from the regional workshops, which normally take place between October and November, they send out the BCC. This is because they are supposed to prepare a budget framework paper. The deadline for the budget framework paper is normally January. This means that between the regional budget workshop and in November, there is only December to prepare the budget framework paper for submission. Hence, the BCC is sent out immediately after the regional workshop since the IPFs are attained at the regional workshop.

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)

4.12.8 Recipients of the budget call circular

The budget call circular is normally sent to all budget committees at all levels i.e. Ministries, districts, municipalities, town councils and sub-counties. The sub-counties then communicate the same to the parishes and villages. The following were listed as recipients of the budget call circular: heads of departments, sub-county chiefs, district planners, chief accounting officers and councillors.

4.12.9 Expectations of budget call circular recipients

The recipients of the budget call circular normally have varying expectations. The size of the resource envelope was the most mentioned expectation. Various departments and sectors would want to know how much was allocated to them as compared to the previous year. Other expectations mentioned were the budget timetable and stipulated government priorities. See Figure 7.

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

4.13.1 Understanding of the budget conference

The budget conference takes place after the sub-counties have compiled a list of priority projects from the villages and parishes. The budget conference is therefore a brainstorming meeting where these priorities are analysed. Currently, the budget conference normally begins by brain storming on the goals and objectives of the local government or sector that has presented its priority projects. This would be followed by a discussion on the challenges facing the local government or sector in question. Then based on the challenges, priorities would be picked for inclusion into the budget.

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:
1. Brainstorming on the goals and objectives of that local government,
2. Brainstorming on the challenges facing the local government upon which priorities are based.

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 attendants to the budget conference are supposed to be conversant with the following:

§ The performance of the previous year
§ People’s needs and expectations
§ Budget process

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

Majority of the respondents were aware of the existence of local and international budget supplements. It was mentioned that supplementation comes from organisations such as World Vision, African Development Bank, African 2000 Network, International Centre for Research in Agro forestry (ICRAF), Participatory Development Management (PDM), Priority areas (PA), National Agricultural Advisory Development Services (NAADS), Poverty Action Fund (PAF), Plan for modernisation of Agriculture (PMA), CARE International, among other non-governmental organisations (NGOs).

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

Ten out of the 18 respondents said that sub-counties have options in supplementing their budgets, while 8 disapprove this notion. The sub-counties depend entirely on the funds from the government. The sub-counties rarely seek funds on their own. In cases where options are available for example from NGOs or donor communities, it was said they come already earmarked for particular projects leaving sub-counties with no option of controlling such funds.

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.

Figure 14: Availability of options for sub-counties

4.14 Budget Approval

4.14.1 Understanding budget approval

Until the budget is approved, it remains just a document without use. Therefore, it was important to establish who approves the budget in the local governments in Uganda. Budget approval in simple terms is the acceptance of budget proposal. The draft is normally presented to the full council, which makes the final decision on whether the projects are to be funded or not. Major stakeholders of the budget approval are councillors. Technocrats, religious leaders, and opinion leaders also attend but may have little input at this stage. The recipients of the budget approval are therefore the full council composed of councillors, council staff, sectoral committee, district executive committee and the budget desk.

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

It was important for the study to establish who and how the budget is presented for approval. The Secretary for finance is called upon to present the budget proposal to the council. The secretary reads the budget proposal to the council; the technical persons then explain all the details in the budget for the councillors to understand. Sectoral committees are then free to propose amendments. The council considers the amendments and especially if the most pressing issues have been addressed before approving the budget. The budget is approved with or without amendments.

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.

Figure 15: Satisfaction with budget presentation

Asked to give suggestions on what should be done to improve budget presentation and approval, respondents suggested the following:
§ Sensitise councillors on budget preparation
§ Involve local community in budget presentation and approval stages
§ More allocation of funds so that projects that approved projects at sub-county level are not only approved but implemented too.
§ Amendments introduced at the approval level should not adversely affect Prioritised projects
§ Presenters of the budget should fully understand and internalise it prior to presentation.

4.15 Sectoral committees

4.15.1 Role of sectoral committees

The sectoral committees are normally constituted from the councillors. At the district level there are 36 councillors and with 6 constituted committees. By law every committee is supposed to have a certain membership in terms of numbers. However, at sub-counties, people are few with few councillors. In constituting the sectoral committees, the chairperson and the speaker are first selected. The rest of the elected councillors then distribute themselves to these committees according to their competencies. Members of different committees can make their input to another committee during debate but cannot vote in a committee to which one is not member. The sectoral committees normally co-opt technical persons in the respective fields to be members of the committee.

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 responsibilities include:
§ Scrutinising documents from technocrats in the interest of their people.
§ Sensitising communities on issues touching their sector
§ Discuss sectoral issues with relevant bodies

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

In their duties, the sectoral committees face with a number of problems. The problems range from limited funds to petty politics, lack of time and lack of technical skills occasioned by low literacy levels among the members. The sectoral committees are allocated specific days for their meetings. If they decide to meet on other days then they do not receive sitting allowances. However, due to limited funds, it is common for them to meet on scheduled days and still not get their allowances. This reduces their morale and ultimately their performance.

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

Top on the list of suggestions was a desire to increase funds allocated to the sectoral committees both for sectoral projects and for sectoral committee members’ allowances. One respondent argued that the government should in fact consider funding the committees directly. Currently the committees’ allowances are sourced from local revenue sources that are very unstable and often influenced by politics. The committee members should also be encourage to always co-opt technical staff who are competent in the sectoral field. This move is appreciably taking place in most committees. For instance, the works committee has an engineer who guides the committee members on technical engineering aspects. There should also be more sensitisation of the committee members through workshops and other trainings to increase their competence and performance.

4.16 The executive committee

4.16.1 Role of the executive committee

In case of municipality, the mayor chairs the executive committee. Its membership is drawn from the sectoral committees. Normally, the chairperson and secretary to sectoral committees are members of the executive committee. Besides, there is a rule to the effect that the committee must have a representative of women, youths and persons with disabilities. This committee has the following roles to play:
§ Initiate policies and monitor implementation of projects
§ Receive and approve resolutions and proposals from sectoral committees
§ Monitor supplementary budgets
§ Analyse and make budgetary recommendations
§ Represent the council

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

One respondent noted that the committee “is doing its job well. We normally have assessment exercises in local government. In the last assessment these, the committee is supposed to sit a number of times to gauge its functionality, and discuss relevant issues which they passed very well. That means that they have been sitting and not only sitting but also discussing relevant issues.”

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.”

Figure 18: Problems faced by the executive committee

4.16.3 Suggestions on improving the performance of the committee

The respondents gave the following suggestion if the performance of the committee is to be improved:
§ Committee should desist from involving itself with expenditure of funds.
§ Work together as a group and put aside personal interests and petty politics
§ Should be full time workers so that they can devote much time to the committee’s duties and responsibilities
§ Should be involved actively in resource mobilization

4.17 The budget desk

4.17.1 The role of the budget desk

The budget desk is composed of the following: Chief Administrative Officer, Chief Finance Officer, Finance Officer, District Planners, Statistician, Population Officer, representative from sectoral and executive committees, heads of departments and other technocrats. The desk is responsible for the following roles:
§ Summarises the inputs of the budget conference and forwards them to the relevant sectoral committees
§ Scrutinises budget proposal and does costing of prioritised projects and come with the budget estimates
§ Prepares the draft budget and incorporates the amendments from the plenary of council to produce the final copy of the annual budget.

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.”

4.17.2 Problems faced by the budget desk

According to Figure 13, 6 out of the 18 respondents said that the main problem faced by the budget desk regards staffing. With the existing poor facilitation, it is normally not very easy to assemble all the technocrats to attend the budget desk meetings. Besides, most of the budget desk members are not very well conversant with the new budgeting software that has been adopted.

Figure 19: Problems faced by the budget desk

The desk also faces time constraints since they also have other duties to perform. The personnel who manage the budget desk also perform other tasks in different fields. Managing the budget desk is just one of their roles. For that reason, the workload is too heavy to allow them to concentrate on budget work.

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:
§ Set aside special grants for the budget desk operations. Due to lack of specific budget item, the budget desk depends on local revenue sources for their stationery and allowances. The remuneration for the budget desk should be provided for from the ministry (conditional grant) just like monitoring and accountability.
§ Have representation from civil society and other committees on the budget desk
§ Have more workshops to share experiences
§ The desk to be free from politicians demands while preparing the budgets
§ Develop the capacity of people on the budget desk on its activities and especially on the use of the budget software, integrated financial and management and the local government information systems.
§ The computers currently in use are obsolete. There is need for capacity building in terms of office equipment more especially with computers and computer accessories. Staff members also need training in handling modern software introduced by the ministry of local government, the integrated financial and management software. They also need to train in order to handle the local government information systems (LOGICS). Members of staff need training on all these packages to ably integrate them in the budgeting and planning process.

4.18 Budget execution

4.18.1 Understanding of budget execution

Budget execution is understood as the actual implementation of approved projects. It involves tendering, identification of contractors, implementation, monitoring and evaluation of approved projects. After the budget has been approved, the tendering process begins. The tenders are advertised in daily newspapers where people show interest and submit their bids to the technical evaluation committee, which scrutinise the applications to see if they qualify. The procurement committee then awards the tenders to identified contractors. The projects are them implemented followed by supervision, monitoring, and then later on evaluation in form of budget performance.

4.18.2 The stakeholders in the budget execution process

Budget execution has many stakeholders. They include technical staff, councillors, executive committee, statutory procurement committee, sectoral secretaries, contracts committee, Chief Administrative Officer, sub-county chiefs, accountants, town clerk chief financial officers, project beneficiaries, and donors.

4.19 Budget appropriation

4.19.1 Understanding the budget appropriation process

The general understanding by respondents was that budget appropriation is a process involving reallocation of resources to specific projects, which are more needy than others or which offer better returns on investment. Some of the sectors where the budget is appropriated were listed as health, education, works, roads, water and production.

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

The respondents were satisfied with the way budget appropriation is done. However, participant would wish to see funds increased and raised in time. Those involved in the process should also avoid being partisan in the process.

4.20 Utilisation of funds

Questions have often been raised on whether departments are free to utilize funds they were allocated in the budget. Figure 14 shows that 15 out of the 18 respondents believe that departments are free to utilize available funds as long as they operate within the budget.

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.

4.21 Accountability

Accountability is provided for in the national Constitution of the Republic of Uganda 1995. Article XXVI (i) states, “All public offices shall be held in trust for the people and (ii) All persons placed in positions of leadership and responsibility shall, in their work, be answerable to the people.

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.

4.22 Vote on Account

Vote on account is a proportion of the national annual budget kept aside to facilitate institutions to operate as they await the national parliament to appropriate the new budget. In case of Uganda, vote on account is one third of the budget.

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

Supplementary budgets are normally necessary in cases where various activities have been under budgeted. According to Figure 16, nine respondents indicated that in a situation when funds allocated and disbursed are not enough there are possibilities of getting supplementary funds from the central government. The organization or responsible departments make a supplementary budget or readjusts the original budget, which they re-submit to relevant authority to get supplementary funds.

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.

4.24 Virement (re-allocation of funds within the budget)

According to Figure 17, 14 out of the 18 respondents noted that it was possible for allocated funds to be re-allocated within the same budget. For instance, if the department had allocated a particular amount of money on fuel and then fuel prices increase making it difficult to operate within the budget then they can re-allocate money for another item to fuel so long as they operate within the overall allocation in a specific unit.

Figure 23: Virement

To carry out virement, one has to apply to the Chief Administrative Officer through the chief financial officer for permission to re-allocate funds. The Chief Finance Officer would then direct the Finance Accounts Assistant to adjust the figures in the financial books. However, in doing virement, funds cannot move from one department to another in the same sector/organization.

4.25 Auditing

Auditing is the process of checking whether financial and operational guidelines were complied with in the use of allocated funds to implement approved projects. It is actually a follow up of expenditure because you can audit fiscal and capital development projects. You can audit value for money and when we talk of auditing, we are actually looking at money value.
Audit is always done at different levels of administration as long as resources are released for use. The study delved into a number of aspects of auditing and responses are given hereto.

4.25.1 Understanding auditing

The stakeholders of auditing are often the department or section charged with the responsibility of auditing at each level, the district internal auditor, the Auditor General and funding organizations.

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

There are two kinds of audit, Routine audit and special audit. Routine auditing involves verifying books of accounts, vouchers etc in accordance with budgetary allocations. This is done both at the district and sub counties. Special audit is done when there has been a problem. For instance if the community sends complaints that the projects are not moving on well then a special audit is done to verify and give a report on the same.

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. Pre-audit

Pre-audit occurs in circumstances when an auditor justifies and allows advance payments for works not yet executed. This can only be done if it is within the budget.

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):
‧ District receives 35%
‧ Lower local councils 65%

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. External audit

External audit of the local governments is the mandate of the Auditor General provided for in Article 163 (3) of the Constitution of the Republic of Uganda, 1995. The constitution gives the Auditor General very broad powers to audit and report on all financial activities of the district local government. He is to express an opinion as to whether the financial statements presented are a fair representation of operations and changes in financial position of the audited entity. In addition, to state whether accounts are presented in accordance with the generally acceptable accounting principles applied on a basic consistence with the previous year.

The major objectives of the audit are
‧ To determine whether the public funds were spent efficiently, effectively and in accordance with the applicable regulations. It is also to evaluate the internal controls, assist in promoting good governance in local governments, and determine value for money in implemented projects.
‧ To undertake investigations to assess whether illegal or improper activities are occurring.
‧ To determine whether the local government complies with applicable laws, rules and procedures during the year.
‧ The Auditor General also assists Parliament and public accounts committee (PAC) in support of their oversight and decision making responsibilities. Challenges of the external audit function

The Auditor General’s audit workers face a number of challenges in pursuance of their duties. The audit environment is one of the challenges. Usually, the control policies by the audited entity tend to be inadequate. Hence, the systems do little to reduce inherent risks. This limits the capacity of the auditor to unearth the irregularities.

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.

4.25.3 Stakeholders in the auditing process

The department office of the CAO has internal auditor and audit assistants and each auditor is affiliated to each sub-county. In some districts there are special auditors for instance auditors for Universal Primary Education (UPE). Then we have the office of the auditor general and any other special audit that may come in case there is a query. The principal function of the Auditor general’s office within the framework of decentralization is to audit the financial accounts of local governments. There are over 1,500 audit units in Uganda including district councils and sub-county councils.

4.26 Desired improvements in the budgeting process

§ The central government should increase budget flexibility of the local governments. The flexibility would go along way in addressing the uniqueness of the environmental circumstances of various sub-counties. One respondent gave the following comments “Increase flexibility to more than 50%. Because you find that here in Kabale the environment is an issue, the issue of land is very critical but when you look at the grants, which are coming, you know most of them are silent on some of those issues. In addition, you know we cannot develop when we do not actually tackle some of these critical issues. Because of some of the conditions that have plagued some of these grants, so if we could be allowed some level of flexibility such that you have the money, then you use it according to the local needs then that would improve on the budgeting” .
§ Strengthen the role of the budget as a poverty reduction instrument through closer alignment of the central and district budget systems, greater involvement of local communities in the development and selection of projects and programs, and improved monitoring of operations.
§ Structural reforms particularly in the financial and parastatal sectors need to be deepening. This should be followed by building up of an effective public service delivery system at the district level.
§ There is also a need to develop and regularly update a comprehensive database for planning and poverty-monitoring purposes for all districts ((Uganda: enhanced Structural Adjustment Facility: Policy Framework Paper, 1999/2000–2001/02)
§ All the projects budgeted for, approved and implemented are hardly found in good condition after three or four years. This is a very big challenge. Improvement is desired in operation and maintenance. There should be a maintenance budget line in the annual local government budget.
§ Privatise projects which have been build through budget funds and yet they lack funds for maintenance and daily running.

Chapter 5: Conclusions and recommendations

5.1 Conclusions

Overall conclusion is that although strong attempts have been made to strengthen the budgeting system, there is a lot more to be done.

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 process depicts elements of democratic channels at all planning stages. However, some stakeholders are left out at some crucial stages especially the approval stage and costing stages. The councillors still have overall say on the projects that have to be implemented.
§ The planning process has ensured careful integration of technocrats at important stages such as costing and prioritising projects.
§ Although technical staff for the budget process could be available, there is no specific allocation for the facilitation of the budget process. The resulting poor facilitation has had a negative impact on the performance of committees in the budget process.
§ Influence of politicians in the budget process mainly occurs at the resource allocation and approval stages. Politicians can reject a project simply because of its location despite its viability.
§ It seems that in the budget process the central government dominates the process of generating indicative planning figure. The dominance could be justified since civil society and the public might not be competent in participating at this stage.
§ The budget is now geared towards feasible outputs. People are now able to see some of the projects they had planned for implementation.
§ Majority of the stakeholders are not well conversant with the budget process.
§ There are local and international organizations such as CARE International and National Agricultural Advisory Services (NAADS) that supplement the budget. Their contribution is normally worked into the overall budget since they are stakeholders in the budget process. This is important because it minimises cases of duplicating efforts.
§ Committees such as sectoral and executive depend on local revenue sources to run their activities. These sources are very unpredictable and unreliable.
§ Misappropriation of funds is checked by strict accountability and auditing procedures. Accountability of funds is done through monthly and quarterly financial returns. Both internal and external auditors often do routine and special auditing.
§ On the whole, the budget in Uganda caters for provision of traditional services such as clean water, electricity, health services, road maintenance, law and order. These services do not directly stimulate economic development in the face of global competition.
§ The central government should develop guidelines to facilitate feedback between them and the local governments. All projects done in the districts should be communicated to local government administration and projects taken up from the districts to the central government should be communicated too. If this were done, it would guide debate on equity in development.

5.2 Recommendations

The government of Uganda should put in place structures that ensure effective and efficient budgeting and budget management at all levels to provide for good governance in the country.

The study has come up with the following specific recommendations:
§ There is need for a budget feedback mechanism. Villages and parishes for example are not informed on the approved projects or the status of projects funded by earlier budgetary allocation.
§ Funds should be set aside by the government to facilitate the budget process. The committees for instance depend on local revenue sources that are unreliable. The fund would ensure relevant people participate in the process.
§ There is need to have active participation of all stakeholders at all levels of the budget process including resource allocation and approval. This would ensure that projects that are implemented address the needs of the people. Politicians and the civil society should play an active role in monitoring projects instead.
§ There is need for the government to communicate to other stakeholders on how the Indicative Planning Figures are arrived at. This would enhance transparency.
§ There is need to sensitise all stakeholders on the budget process so that they can know their level of involvement and contributions. Therefore, the budget process should be preceded by a thorough awareness creation. This exercise should be for the civil society and the broader public. Combinations of radio programmes and other media campaigns should be considered for this purpose.
§ There is need to build the capacity of civil society organisations both at national and local levels. This will create the capacity of every one to participate in the budget process.
§ Educational institutions’ curricula especially Universities should reflect the needs of the economy. For example, a student of Economics at University should be able to participate fully in budgeting and planning after graduating.
§ Taking into consideration interests of the private sector has not been given due attention. I recommend that with globalisation, business people should be trained in how to transact international business. They should be exposed to opportunities of international trade, stock market operations, joint ventures and others that emerge with time.

5.3 Areas for further research

In order to continue to improve the budgeting process in Uganda, it is important for further scientific investigation to be carried out. The following are the researcher’s proposals for further study:

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.
2. One reason identified as a problem was low levels of facilitation of staff. It is therefore important to find out how facilitation of staff can be improved to ensure maximum benefit from their participation in the budgeting process.
3. The research also established how there is no clear feed back process in place. The effect of this is that participants are not able to understand how to improve in the future. Hence, it is necessary that the feedback mechanism that may create and ensure efficiency and effectiveness in the budgeting process is sought.
4. How the capacity of the Civil Society can be built to ensure effective participation and information flow.
5. Although other local and international initiatives such as CARE International and National Agricultural Advisory Services (NAADS) supplement the budget by working their contribution into the overall budget, there is need for an in-depth study to establish the real comparative advantages of this approach over direct and independent project support by the donors.
6. A broader comparative research ought to be done to compare the effectiveness of the Uganda budget process and execution and that of other countries especially those in the East African Community. Such a study should highlight areas of weakness in the budgeting process in Uganda for purposes of improving.
7. A study should be undertaken to establish the limitations in the audit section with a view of improving its efficiency and effectiveness.


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