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REPUBLIC OF UGANDA

LOCAL GOVERNMENT FINANCE COMMISSION

ANNUAL REPORT

2014/15

The Local Government Finance Commission

1 Pilkington road, Workers House, 10 th floor P. O. Box 23143,

Kampala, Uganda

Tel +256-414-340192

Fax: +256-414-340228

Email: lgfc@lgfc.go.ug - www.lgfc.go.ug

FINANCIALY SUSTAINABLE LOCAL GOVERNMENTS

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LOCAL GOVERNMENT

FINANCE COMMISSION 10th Floor Workers' House

Plot 1 Pilkington Road

P.O. Box 23143

July 11, 2016

The Rt. Hon. Speaker

Parliament of Uganda

Parliament House

Kampala

Madam Speaker,

RE: LOCAL GOVERNMENT FINANCE COMISSION ANNUAL

REPORT 2014/15

In compliance with Section 25(I) of the Local Government Finance Commission

Act 2003, I have the honor and pleasure to submit to you the Annual Report for

the Local Government Finance Commission in respect of the activities,

challenges and recommendations for the year 2014/15.

Tom Matte

CHAIRPERSON

LOCAL GOVERNMENT FINANCE COMMISSION

CC:

The Hon Minister

Ministry of Local Government

The Permanent Secretary

Ministry of Local Government

THE REPUBLIC OF UGANDA

Telephones:

• Chairman…………………….…340226

• Vice-Chairperson……………….342456

• Commission Secretary……….…340227

• General Lines…………………...340192

• Fax………………………………340228

• Email lgfc@lgfc.go.ug

•

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CONTENTS

ABBREVIATIONS AND ACRONYMS ............................................................................... IV MESSAGE FROM THE CHAIRPERSON ............................................................................ 4 MEMBERS OF THE FIFTH COMMISSION (2013– 2017) ................................................. 6 EXECUTIVE SUMMARY .................................................................................................... 10 1.0. THE MANDATE AND FUNCTIONS OF THE COMMISSION ............................................. 12 1.1 THE FUNCTIONS OF THE COMMISSION ........................................................................ 12 1.2 VISION, MISSION AND VALUES.................................................................................... 12 1.3 COMPOSITION OF THE COMMISSION .......................................................................... 13

2.0 INTRODUCTION ................................................................................... 15 2.2. CONTRIBUTING TO IMPROVEMENT OF THE STATE OF FUNDING ……………….15

3.0 SUPPORTING LOCAL GOVERNMENTS…………………………………… 22

3.1 ESTABLISHMENT OF LOCAL REVENUE DATABASES ........................................ 22

3.2 ANALYSIS OF THE TREND OF LOCAL REVENUES .............................................. 24

3.3 TECHNICAL SUPPORT FOR PROPERTY RATE COLLECTION ............................. 25

3.4 LOCAL REVENUE ENHANCEMENT COMMITTEE MEETINGS ............................ 26

4.0 ENHANCING THE INSTITUTIONAL CAPACITY OF LGFC ................. 27

4.1 BUDGET PERFORMANCE FOR FY2014/15 ............................................................ 27

4.2 POLICY ANALYSIS) ............................................................................................ 27

4.3 HUMAN RESOURCES MANAGEMENT ................................................................. 29

4.4 ENHANCEMENT OF THE MANAGEMENT INFORMATION SYSTEM ...................... 29

4.5 STRENGTHENING THE FISCAL DATA BANK ....................................................... 29

4.6 IMPLEMENTATION CHALLENGES ....................................................................... 30

5.0 BUILDING PARTNERSHIPS AND SYNERGY .............................................31

5.3 PARTICIPATING IN PUBLIC SECTOR MANAGEMENT SECTOR ACTIVITIES .......31

5.4 FACILITATING BUDGET FRAMEWORK PAPER WORKSHOPS .............................31

6.0 GENERAL RECOMENDATIONS ..................................................................... 33

ANNEX 1:STAFF OF LGFC AS AT 30TH JUNE 2015 ........................................ 34

ANNEX 2: FY2014/15 PERFORMANCE OF RELEASES TO DISTRICTS ……..35

ANNEX 3: PERFORMANCE OF RELEASES TO MUNICIPAL COUNCILS ........................ 38

ANNEX 5: REVENUE ALLOCATION TO TOP PRIORITY AREAS .................................... 42

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ABBREVIATIONS AND ACRONYMS

BFP Budget Framework Paper

CG Central Government

FDA Fiscal Decentralisation Architecture

FDS Fiscal Decentralisation Strategy

FINMAP Financial Management and Accountability Programme

FY Financial Year

LG Local Government

LGBFP Local Government Budget Framework Paper

LGFC Local Government Finance Commission

LGHT Local Government Hotel Tax

LGMSD Local Government Management & Service Delivery

LRECC Local Revenue Enhancement Coordinating Committee

LST Local Service Tax

MC Municipal Council

MDAs Ministry, Departments and Agencies

MOFPED Ministry of Finance, Planning & Economic Development

MOLG Ministry of Local Government

NDP National Development Plan

NPA National Planning Authority

PSM Public Sector Management

TC Town Council

TOR Terms of Reference

MESSAGE FROM THE CHAIRPERSON

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During the FY2014/15, the Commission implemented some of the activities in the

Strategic Plan (FY2012/13 – FY2015/16). This report presents what was carried out and the

challenges faced.

During the year under review, a consultant was procured to review the allocation formula to

ensure equity in the allocation of financial resources from the central government to local

governments.

The Local Government Finance Commission also began the process of reviewing its

structure and establishment to make it responsive to the current needs. At the same the

commission began a process of producing regulations to put into effect the Local

Government Finance Commission Act 2003. All these are intended to strengthen the

commission to fulfill its mandate.

The establishment of data bases for efficient management of Local revenue covered 16

districts and 14 municipal councils. Local revenue registers for at least 5 revenue sources

have been computerized. The plan is to cover all local governments in the medium term.

The Commission analysed the share of financial resources from the consolidated fund to local

governments and observed that the trend took a further downward trend in the last two

financial years from 17% in FY2012/13 down to 16% in the year under review. Specifically,

the unconditional grant dropped further from 4% in FY2013/14 down to only 3.5% in

FY2014/15.

Convening and facilitating the annual negotiations between local governments and line

sector ministries on effective utilization of conditional grants from the 7 sector ministries

to local governments, was one of the key activities of the Commission.

I am grateful to the Office of the Prime Minister, the Committee of Parliament of the

Republic of Uganda on Public Service and Local Government, the Hon. Minister of

Finance, Planning and Economic Development and the Hon. Minister of Local

Government and the Ministry of Public Service, for supporting the work of the

Commission.

The Commission is grateful to the National Planning Authority, Uganda Local

Government Association (ULGA) and Urban Authorities Association of Uganda

(UAAU) for their technical and expert contribution towards the annual negotiations

between sectors and local governments on the utilization of conditional grants.

Lastly, I am also grateful to the members and staff of the Commission for commitment and

hard work put into planning and management of the negotiation process which enabled us to

realize the intended results.

Tom Matte

CHAIRPERSON

LOCAL GOVERNMENT FINANCE COMMISSION

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MEMBERS OF THE FIFTH COMMISSION (2013– 2017)

TOM MATTE CHAIRPERSON Mr. Tom Matte is the Chairperson of the Local Government Finance Commission (2013 – 2017). He represents the Central Government. Prior to his appointment, he served as a Public Administrator in various districts and Ministries rising to the rank of Director in the Ministry for Local Government, a level at which he retired.

MRS. SARAH NAMBASSA MUKASA VICE CHAIRPERSON Mrs. Sarah Nambasa Mukasa is the Vice Chairperson. She was re-elected in 2013 and is serving her second and last term having been first elected Vice Chairperson during her first term in October 2008. She represents Central Government. Mrs. Mukasa is a distinguished professional Accountant with vast experience having previously worked in the Ministry of Finance, Planning and Economic Development and Uganda Revenue Authority in various capacities.

MR. ADRIAN KYAMUGINA MEMBER Mr. Adrian Kyamugina represents Central Government and is serving

his second and last term. He is an experienced tax administration

specialist with a long track history of service in the East African

Community, Ministry of Finance and Uganda Revenue Authority

where he rose to the rank of Deputy Commissioner Customs,

Finance and Administration, Commissioner Internal Audit and Tax

Investigation until 2005 when he retired. He is now a tax consultant, a

Chairperson of Finance and Strategic Planning Committee, Kampala

International University Council and Vice- Chairperson, Kampala

International University Teaching Hospital. Mr. Kyamugina is the

Chairperson, Finance and Administration Committee.

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HON. MILIGAN ROSE LOCHIAM MEMBER Hon. Miligan Rose Lochiam represents District Local Governments and is serving her first term. She has a lot of experience in Public Affairs Management having been a Member of Parliament for Moroto District. She is the Chairperson, Audit Committee.

MR. CHARLES KATARIKAWE

MEMBER Mr. Charles Katarikawe represents Urban Authorities Association of

Uganda and is serving his first term. He has a very long experience in

Urban Authorities administration having served as Town Clerk in

various town councils and municipalities of Uganda. He also served in

Namibia as a consultant on decentralized governance. He retired

from the Ministry of Local Government at the rank of Commissioner,

Urban Administration.

HON CAPT. JOHN EMILY OTEKAT

MEMBER Hon. Capt. John Emily Otekat represents District Local Governments and is serving his first term. He has vast experience in Public Affairs and Local governance. He was chairperson of Soroti District and President of Uganda Local Governments Association (ULGA). He represented Soroti in Parliament and is also a member of the Uganda Wild Life Authority Board. He chairs the Research and Policy Analysis Committee.

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MMR. SAM OGENRWOTH MMEMBER

Mr. Sam Ogenrwoth represents District Local Governments and

is serving his first term. He has a wealth of experience in public

management and Administration having served in many parts of

Uganda as administrative officer for many years rising to the rank

of Chief Administration Officer (CAO) at which he retired.

THE TOP TECHNICAL STAFF

MR. LAWRENCE BANYOYA COMMISSION SECRETARY

The Commission Secretary is a public officer appointed

by the Commission in consultation with the Public

Service Commission and specified in his or her

instrument of appointment. He is the head of the

Secretariat and responsible for day to day administration

of the Commission. He is assisted by the Director

Finance and Administration and Director Research and

Policy Analysis.

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MR.JIM ASHABA AHEEBWA DIRECTOR FINANCE AND ADMINISTRATION

The Director provides support services to the Commission in areas of financial management, human resource management/development, administrative services, logistical and information management systems. Procurement/Disposal, Monitoring & Evaluation.

MR. ADAM BABALE DIRECTOR RESEARCH AND POLICY ANALYSIS The Director undertakes research and provides technical

support to Local Governments on various aspects related to

fiscal decentralization for improved service delivery. The

Directorate makes analysis of sector policies to derive

evidence-based advice that the Commission provides to

H.E. the President; the Central Government, Local

Governments and other agencies on the financing of local

governments

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EXECUTIVE SUMMARY

During the FY2014/15, the Commission implemented planned activities under the four

strategic areas in the medium term highlighted in the Strategic Plan (FY2012/13 –

FY2015/16) namely: (i) Contributing to the improvement of the state of funding for LGs

in the national budget; (ii) Promoting equity in resource allocation among LGs; (iii)

Supporting LGs to improve Local Revenue performance; and (iv) Enhancing the

institutional capacity of the LGFC to effectively perform its mandate.

The Commission received UShs 4.578 billion of which UShs 0.311 billion was for

development, UShs 1.119 billion for wage and, UShs 3.148 billion for non-wage recurrent.

The funds were used to carry out the following activities:

Tracking the trend in the Transfer of Central Government Grants to Local

Governments

The Commission analysed the share of financial resources from the consolidated fund to

local governments. The analysis indicated that the approved direct budget transfers in

nominal terms increased from Ugx. 1,855.5bn in FY 2012/13 to Ugx. 2,360.2bn in FY

2014/15. However, as a share of the national budget, it exhibited a downward trend in the

last two financial years from 17% in FY2012/13 to 16% in the year under review. The

unconditional grant dropped from 4% in FY2013/14 to only 3.5% in FY2014/15.

Convening and facilitating the Annual Negotiations on effective implementation

of conditional grants funded programs

The commission convened and facilitated annual negotiations between sector line

ministries and local governments. Agreements were signed with 7 sectors line

ministries managing conditional grants. To ensure effective implementation of the

agreements, each party was obliged to take certain actions as indicated below:

The sectors were charged with preparing revised guidelines and disseminating them to LGs for

preparing the budget for FY 2015/2016 not later than 15th April 2015.

The sector line ministries were required to attach the signed agreements for FY 2015/16

as annexes to respective Ministerial Policy Statements.

The sector line ministries and local governments alike were required to implement agreed

activities in accordance with the respective agreements signed.

ULGA and UAAU were charged with disseminating the agreements to local governments

whom they represent

Analyzing Local Government Approved Annual Budgets for FY2014/15

The Local Government Finance Commission analyzed 133 vote holder LGs approved

annual budgets for the year under review for compliance with legal provisions. The

analysis found out that 5 districts had approved and submitted unbalanced budgets. The

Commission provided feedback to the concerned Local Governments. All districts

councils did not allocate reasonable funds to national priorities from local revenues.

Funds from local revenues were mainly allocated to the departments of Finance, Statutory

Bodies, Planning and Internal Audit. This implies that national priorities are basically

funded through conditional grants.

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Establishment of local revenue data bases

During the year under review, the Commission supported 45 LGs with skills to establish

databases for all local revenue sources. Continued to provide technical support in the

collection of property rates. The technical support focused on strategies to improve the

compilation of property registers, valuation rolls and collection methods. During the same

year under review, the Commission facilitated three policy dialogue meetings of stakeholders

on revenue enhancement. The key issues discussed during the meetings were:

Review of legal provisions for local revenue management in local governments.

Progress on the USMID programme in terms of targets and funding levels;

Implications of the revoked Cess on produce Licenses

Management of vehicle parks and markets.

Establishment of fiscal databases and challenges in database management in local

governments

Under institutional capacity enhancement, the Commission carried out one outreach in the

districts of Nwoya, Arua and Nebbi. The overall objective was to meet with LG leaders that

include the District Executive Committee (DEC) and District Technical Planning Committee

(DTPC) to generate ideas on Local Economic Development (LED), Commercial Agriculture

and Royalties as potential sources of local revenues for local governments. The Commission

approved implementation of a staff health insurance policy; reviewed the Human Resource

Policy; conducted team building workshop and recruited the following staff; 1 Senior Policy

Analyst, 1 Senior Revenue Officer, 1 Revenue Officer, and Senior Stores Assistant.

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1.0. THE MANDATE AND FUNCTIONS OF THE COMMISSION The Commission derives its mandate from Article 194 (1) of the Constitution of the Republic

of Uganda (1995) and it functions as defined under Article 194 (4) of the Constitution. The

Commission’s mandate and functions are elaborated in section 9 of the Local Government

Finance Commission Act (2003).

1.1 The Functions of the Commission The Commission is mandated to carry out the functions below:

a) Advise the President on all matters concerning the distribution of revenue between the

Government and Local Governments and the allocation to each Local Government of

money out of the consolidated fund.

b) Consider, in consultation with the National Planning Authority, and recommend to the

President the amount to be allocated as equalization and conditional grants and their

allocation to each Local Government.

c) Consider and recommend to the President potential sources of revenue for Local

Governments.

d) Advise the Local Governments on appropriate tax levels to be levied by Local

Governments.

e) Mediate in case a financial dispute arises between Local Governments and advise the

Minister accordingly.

f) Analyse the annual budgets of Local Governments to establish compliance with the legal

requirements and notify the Councils concerned and the President through the Minister

for appropriate action.

g) Recommend to the President through the Minister, the percentage of the National Budget

to be transferred to Local Governments every financial Year.

h) Recommend to the President, Central Government taxes that can be collected by Local

Governments in their respective jurisdiction on an agency basis.

i) Perform such other functions as may be prescribed by law.

1.2 Vision, Mission and Values To fulfil the above functions the Commission has the following Vision, Mission and Values

1.2.1 Vision Statement

Financially Sustainable Local Governments

1.2.2. Mission Statement

To offer credible and evidence-based advice to Government on financing Local Governments.

1.2.3. Values

The Commission subscribes to the following values as enshrined in the Code of Conduct and

Ethics for Uganda Public Service:

a) Professionalism: which calls for strict adherence and exposition of high degree of

competence and best practices as prescribed for in a given profession

b) Commitment: which encourages loyalty to policies and programmes of the Commission

c) Team Work: which encourages cross-functional integration; voluntary mentorship and

coaching taking responsibility; and flexibility

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d) Transparency: which causes openness about all the decisions and actions taken by a

public officer

e) Integrity: which requires honesty and openness in conducting public affairs

1.2 Composition of the Commission

The Commission comprises seven (7) members representing constituent interest groups as

indicated below:

Three (3) members represent District Councils;

One (1) member represents Urban Councils; and

Three (3) members represent the Central government nominated by the Minister

responsible for Local Governments (MoLG) in consultation with the Minister responsible

for Finance (MOFPED).

The Chairperson and the Vice Chairperson are elected on the first sitting from amongst the

seven (7) members and are engaged on full time basis while the five (5) members are part

time.

Members of the Commission are appointed by the President of the Republic of Uganda for a

period of four (4) years but are eligible for reappointment for another four year term in

accordance with the Constitution and the Local Government Finance Commission Act

(2003).

1.3.1. Committees of the Commission The Commission operates under three Committees namely:

Finance and Administration Committee

The Finance and Administration Committee ensures value for money spent on all

Commission activities and compliance with applicable laws, regulations and standards.

The finance and administration committee met three times during the year to consider

recruitment, confirmation and promotion of staff. It also dealt with policy proposals and

finance and administration matters

Audit Committee

The Audit Committee assists the Commission in overseeing the quality and integrity of the

financial statements, the scope and effectiveness of the external audit function; and the

effectiveness of the Commission’s internal controls and internal audit function. The mandate

of the Committee also includes oversight of the Commission’s performance against

predetermined objectives and Commission’s financial and non-financial risk management and

fraud prevention efforts. All members, except the Chairperson, sit on the Audit Committee

and during the year under review, the committee met two (2) times.

Research and Policy Committee

The role of the research and policy Committee is primarily to assist the Commission in

overseeing research and policy related matters. The Committee provides technical support

for the work of the Commission’s research and policy recommendations. Activities include

making recommendations on programme outputs, reviewing concept notes for the

implementation of approved programmes; providing strategic direction in the process of

programme implementation and monitoring progress. Equally critical is the committee’s role

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in developing and tracking effects of national policies on financing of Local Governments

and making recommendations for the approval of the Commission.

1.4. Funding for the Commission The Local Government Finance Commission is self-accounting (Vote 147) as per section 17

(4) of the Local Government Finance Commission Act, 2003. It is funded from the

Consolidated Fund in accordance with article 194 (5) of the Constitution but can also be

funded through grants and donations from non-government sources with the approval of the

Minister responsible for Local Governments. Currently all funding comes from the

Government.

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2.0 REPORT ON PERFORMANCE IN FY2014/15

2.1 Introduction This section highlights the performance of the Commission under each medium term

strategic objectives namely: (i) Contributing to the improvement of the state of funding

for LGs in the national budget; (ii) Promoting equity in resource allocation among LGs;

(iii) Supporting LGs to improve Local Revenue performance; and, (iv) Enhancing the

institutional capacity of the LGFC to effectively perform its mandate in line with the

overall decentralization policy, National Development Plan, Public Sector Management

Strategic Investment Plan and the Local Government Sector Strategic Plan.

2.2. Contributing to Improvement of the State of Funding for Local

Governments in the National Budget

Under this medium term objective, the Commission carried out four main activities namely:

(i) Tracking the trend of central government transfers to Local Governments; (ii) Organising

and facilitating the Annual Sector Conditional Grants Negotiations between sector ministries

and local governments; (iii) Analysing Local Government Budgets; and (iv) Supporting local

governments to improve budget formulation and execution processes.

2.2.1 Tracking the Trend in the Transfer of Central Grants to Local

Governments

Grants constitute the major source of revenue to Local Governments. Under Article 193 of

the Constitution of the Republic of Uganda three (3) categories of grants are provided for

transfer to Local Governments. Under Article 194 (1)(a) the Commission is to make

recommendations to the President concerning the distribution of revenue between

Government and Local Governments and the allocation to each Local Government of money

out of the consolidated fund. The commission therefore tracks the trend of transfers of the

following grants:

(i) Unconditional Grants

In accordance with article 193 (2) of the Constitution, unconditional grant is the minimum

grant that is paid to Local Governments to run decentralized services. The grant is

intended to fund non-wage for services decentralised to Local Governments.

(ii) Conditional Grants

These are grants that consist of monies given to Local Governments to finance

programmes agreed upon between Sectors and Local Governments. These grants have

conditionality agreed upon and must be expended in accordance with the purpose for

which they are given by Central Government.

(iii) Equalisation Grant

Equalisation grant is money paid to Local Governments as subsidies or provisions for the

least developed districts which should be based on the degree to which a local government

service is lagging behind the national average standard for a particular service. It is

therefore determined and allocated based on analysis of service standard or levels in each

Local Government for each service.

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During the period under review the Commission analysed the grants transfer as indicated

below:

2.2.2. Performance of Grant Releases to LGs FY 2014/2015 in Ushs'000 During the period FY 2014/2015 the releases during the year under review performed at

an average of 89%.

Category Amounts (for 133 LGs)

Approved Budget Actual Released Performance

Wage Recurrent 1,518,686,792 1,337,597,520 88%

Non-wage Recurrent 713,619,616 701,141,519 98%

Domestic Development 543,178,971 433,385,073 80%

Total 2,775,485,380 2,472,124,112 89%

Wage recurrent performed at 88%, non-wage. Recurrent at 98%, and Domestic

Development performed at 80%.

The Trend of Grants between FY2010/11 to FY2014/15. The analysis of the trend covered the disaggregated releases for the period of five years,

i.e.FY2010/11 to FY2014/15 as indicated below.

Trends of Grant Transfers to LGs Against the Share of the National Budget (Ushs' Billions)

FY

Unconditional Grant G tax Compensation Equalisation Grant Conditional Grant Total Transfers to LGs

National Budget

% of Direct Transfers to National Budget

Amount % of Total Transfers to LGs

Amount % of Total Transfers to LGs

Amount % of Total Transfers to LGs

Amount % of Total Transfers to LGs

2010/2011 156.7 10.6% 45 3.1% 3.5 0.2% 1,269.60 86.1% 1,474.80 7,376.50 20.0%

2011/2012 77 4.7% 0 0.0% 3.5 0.2% 1,575.20 95.1% 1,655.70 9,630.00 17.2%

2012/2013 79 4.3% 0 0.0% 3.5 0.2% 1,773.00 95.6% 1,855.50 10,902.80 17.0%

2013/2014 79.6 4.0% 0 0.0% 3.5 0.2% 1,896.30 95.8% 1,979.40 12,904.00 15.3%

2014/2015 82.57 3.5% 0 0.0% 3.6 0.2% 2,274.00 96.3% 2,360.17 15,054.00 15.7%

Source: LG Final Accounts

The table above, shows a decline in the share of financial resources from the consolidated

fund to local government taking a downward trend from 20% in FY2012/13 down to 15.7%

in the year under review. The unconditional grant dropped from 4% in FY2013/14 to 3.5% in

FY2014/15. The drop affected the discretion for local councils in setting their local priorities

in their respective local governments.

2.2.3. The trend of the share of grant transfers to LGs verses National

Budget The commission also analysed the trend of transfers to local government against the national

budget and the results are as shown in the bar chart below.

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0

2000

4000

6000

8000

10000

12000

14000

16000

2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

Tran

sfe

rs i

n U

Shs'

Bill

ion

s

Financial Year

Trends of Grant Transfers to LGs Versus the Share of the National Budget (Ushs' Billions)

Unconditional Gtax Compensation Equalisation Conditional Total Transfers to LGs National Budget

Source: LGs final Accounts

The bar chart above shows that while the national budget grew steadily the transfers to LGs,

especially equalisation grant, have remained more or less stagnant. The graph below illustrates the

trend more clearly.

Total direct transfers to LGs versus the National Budget for the period 2010/11-2014/15

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

Am

ou

nt

in U

shs'

Bill

ion

s

Financial Year

Trends of Total Direct Transfers to LGs Versus the National Budget (Ushs' Billions)

Total Transfers to LGs

National Budget

Source: LG Final Accounts

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2.2.4. Facilitation of Annual Negotiations on Sector Conditional Grants

The commission organized and facilitated the annual negotiations between sector line ministries

and Uganda Local Governments Negotiating and Advocacy Team (UNAT) in accordance with

Article 193 (3) of the Constitution of the Republic of Uganda which states that “Conditional grants

shall consist of monies given to Local Governments to finance programmes agreed upon between

the government and the Local Governments and shall be expended for purposes for which it was

made in accordance with the conditions agreed upon.”

The main objective of holding the annual negotiations is to provide a forum for discussion

between the central government line ministries and local governments with a view of coming up

with effective mechanisms to support the implementation of programmes funded through

conditional grants.

During the year under review, the specific objectives for the negotiation were:

1. To discuss and agree on sector guidelines for FY2015/16

2. To clarify to all stakeholders what part of national sector policies local governments are to

implement and agree on priorities for FY2015/16.

3. To review conditions for fairness in the sharing of funds between central government

responsibilities and those assigned to local governments;

4. To identify pertinent issues affecting service delivery in local governments;

5. Agree on modalities with respect to work plans, budgeting and reporting.

The negotiation meetings were held between the 29th September and 3rd October 2014 and all the

seven sector line ministries that provide conditional grants participated and these are:

1. Ministry of Water and Environment,

2. Ministry of Education, Science, Technology and Sports,

3. Ministry of Agriculture, Animal Industry and Fisheries,

4. Ministry of Trade, Industry and Cooperatives,

5. Ministry of Health,

6. Ministry of Gender, Labor and Social Development,

7. Ministry of Works and Transport.

Cross-cutting ministries and agencies also participated in the negotiations and provided policy

clarifications on cross cutting policy areas under their respective jurisdictions. They iare:

1. Ministry of Finance, Planning and Economic Development,

2. Ministry of Public Service

3. Ministry of Local Government,

4. Office of the Prime Minister and

5. National Planning Authority

2.2.5.General obligations agreed upon

The negotiations came up with the following generally agreed positions:

1. The sectors to prepare and disseminate specific sector and grant utilization guidelines for (FY

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2015/2016) not later than 15th April 2015.

2. The Sector line ministries to attach the signed agreements for the financial year 2015/16 as

annex to respective Ministerial Policy Statements.

3. Communicate to the Chief Administrative Officers and Town Clerks the issues agreed upon in

the negotiations for Local Governments to implement in their respective sectors.

4. Sector line ministries and local governments to ensure timely response to issues raised by the

Local Governments, Local Government Associations and Local Government Finance

Commission.

5. Each party to implement its obligations in accordance with signed agreement.

6. Local Government Finance Commission to liaise with Ministry of Finance Planning and

Economic Development (MOFPED) to ensure that all funds for capital development are

released to Local Governments by the third Quarter of each financial year.

7. Sectors to ensure adequate involvement and participation of the Accounting Officers of Local

Governments in sector reviews.

8. Sector line ministries to invite and provide a slot to the Local Government Associations (ULGA

and UAAU) to present on the key issues affecting service delivery.

Specific sector issues that affect service delivery in LGs as outlined in Annex 3 were noted for

further follow up and consideration under each sector.

2.2.6.Challenges faced during negotiation and Recommendations

The Commission experienced challenges in the process of organizing and facilitating annual

negotiations enumerated as follows:

i) There are no in-built sanctions on either parties especially the sector ministries in case of failure

to implement actions agreed resulting into slow progress towards the achievement of intended

objectives of the negotiations.

Recommendation:

It was recommended that sanctions should be created to ensure that parties effectively observe and

implement agreed positions.

ii) There is inadequate sector collaboration in annual planning with LGs on activities under

conditional grants. As a result there is a gap in information sharing between the parties leading

to reoccurrence of issues every year the negotiations are held.

Recommendation:

Sector Accounting Officers should deliberately invite Local Government and the Commission to

participate in discussions on financing issues of LGs during the annual sector reviews.

iii) Sector line ministries do not observe provisions of Article 193(3) of the Constitution of the

Republic of Uganda and Section 83(3) of the Local Governments Act Cap 243 which state that

“Conditional grants shall consist of monies given to Local Governments to finance

Programmes agreed upon between the Government and Local Governments; and shall be

expended only for purposes for which it was made in accordance with the conditions agreed

upon.” The practice is that release of conditional grants are not based on agreed Programmes

upon between Sectors and Local Governments but on the conditions agreed upon.

Recommendation:

Sector line ministries should ensure that expenditures on conditional grants are on those

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Programmes that reflect the needs and priorities of the local people or agreed on with LGs.

For effective organization and facilitation for annual negotiations, the Commission requires aa

adequate budget. The current provision in the MTEF is inadequate and with limited quarterly cash

limit, the Commission continues to struggle to fund negotiations. The Commission requires an

estimated budget UShs 200 million additional to be able to effectively engage all parties involved

and effectively monitor the agreed undertakings within scope and timeline.

Recommendation:

Additional budget should be provided by Ministry of Finance Planning and Economic

Development.

2.3.0 Analysis of LGs approved Budgets for FY2014/15

The Commission analyzed the approved budgets of local government for FY2014/15.The task

was carried out in accordance with Section 9(f) of the Local Government Finance

Commission Act, 2003 which gives the Commission the obligation to analyse LGs approved

budgets. The analysis focused on compliance with the following:

i. Establish whether the LG budget balances1

ii. Establish whether the LG Budget reflect all the revenues to be collected or received by

the local government and to be appropriated for each year2.

iii. Ascertain whether the LG accorded national priority programme areas preferential

budget outlays (especially when considering discretionary resources such as Local

Revenues)3

iv. Establish whether the LG had indicated how the conditional and equalisation grant

obtained from Government have been passed on to lower local governments4

v. Establish whether the LG had secured a loan or any assistance to use in providing

service delivery5

vi. Confirm whether the local revenue collected has been shared in the legally provided

ratios6.

2.3.1 Key Findings/Observations from the analysis of the 2014/15 Budgets

2.3.2 Balancing the Budgets All except five districts had balanced budgets. The five districts with unbalanced budgets are

shown in the table below:

1 Section 77 (1) of the Local Governments Act (CAP 243) 2 Section 77 (4) of the Local Governments Act (CAP 243) 3 Section 77 (2) of the Local Governments Act (CAP 243) 4 Section 83 (5) of the Local Governments Act (CAP 243) 5 Article 195 of the Constitution of the Republic of Uganda and Section 84 of the Local Governments Act (CAP 243) 6 Section 85 of the Local Governments Act (CAP 243)

21

Districts with Unbalanced Budgets FY 2014/2015

Vote District Total Revenues Total Expenditure Total Rev minus Total

Expenditure

524 Kibaale 40,176,820 40,181,091 (4,271)

528 Kotido 11,637,663 11,654,120 (16,457)

530 Kyenjojo 26,046,206 23,882,373 2,163,833

545 Nebbi 30,640,182 30,640,782 (600)

551 Sembabule 21,090,382 21,083,281 7,101

TOTAL 129,591,253 127,441,647 2,149,606

Source: LGFC LGs Fiscal Databank

(i) Inclusion of National Priorities

Local governments are majorly funded through conditional grants which creates operational

framework that ensures that national priorities are earmarked for funding.

(ii) Allocation of Revenues to National Priorities

A total of Ushs 94bn was collected as locally raised revenue and this was discretionary

allocated to different sectors. It was noted that discretionary revenue were allocated

proportionately. Analysis of the 111 district local governments, revealed that:

(i) 40% of the districts did not allocate local revenue to the water sector

(ii) 14% of the districts did not make any allocation to Roads and Engineering

(iii) 8% of the districts did not make allocations to the education sector

(iv) 17% of the districts did not make allocations to Health Sector

(v) 4% of the districts did not make allocations to the production sector

Annex 5 shows the level of allocation to the top national priorities of production and

marketing, health, education, roads and water

2.3.4. Supporting the Operations of the Local Government Budget

Committee (LGBC)

The Local Government Budget Committee (LGBC) is a multi-sectoral Committee that is

facilitated by the Commission to engage relevant sectors in policy dialogue on matters of

budget formulation and operation in Local Governments. During the year under review, the

committee held only one meeting due to resource constraint whose major agenda was to

discuss a draft report on the review of the Grants Allocation Formulae to cater for cross-

cutting issues and a draft report on Local Government Budget analysis.

2.3.5. Review of Grants allocation formulae:

The Commission facilitated a study on the review of grants allocation formulae being one of

the priority areas highlighted in the National Development Plan and also emerged from the

study on LG financing conducted in FY2012/13.

22

The main objective of the study was to review the allocation formulae of grants to Local

Governments to make them respond to challenges of cross cutting issues namely: HIV/AIDS,

Environment and Gender. Specifically, the study focused on the following areas:

i) Document the current grants allocation formulae for all the seven sectors

ii) Determine the extent to which the current allocation parameters address cross-cutting

issues (poverty, gender, HIV/AIDs and environment).

iii) Determine a conservative national estimate of the resources required addressing /finance

activities in each of the grants to cater for cross cutting issues.

iv) Recommend parameters to enable sectors address cross-cutting issues for grants

2.3.6 Recommendations The Commission made the following recommendations:

i) UGX 69 billion be sought to fund the gaps identified to implement strategies to address

the crosscutting issues (Gender, environment and HIV/AIDS) for decentralized services.

ii) LGs should be supported to develop efficiency and clear supportive programs, that will

put measures to reduce wastage of resources such as construction materials, water, energy

and other production inputs without affecting productivity and the environment.

iii) Community contribution as recommended by the study on the Review of LG financing;

coupled with training should be implemented in the Health and Education sectors.

iv) The Ministry of Water and Environment’s requirement for EIA for every project should

be enforced to reduce environmental degradation in the country.

v) Sectors should plan and budget for expenses to cover operations and monitoring by LGs.

3.0 SUPPORTING LOCAL GOVERNMENTS IMPROVE LOCAL

REVENUE GENERATION

The Commission is obliged under Article 194 (4c and d) to recommend to the President

potential sources of revenue for local governments and advise local governments on

appropriate tax levels. During the year under review, the Commission carried out four major

interventions namely: (i) supported LGs to establish databases for all local revenue sources;

(ii) analyzed the trend and the performance of local revenues; (iii) provided technical support

to LGs in mechanisms for collection of property rates; and (iv) convened and facilitated the

operations of the Local Revenue Enhancement Coordinating Committee.

3.1 Establishment of Local Revenue Databases It had been established in 2011 that lack of credible data on local revenues was one of the

constraints affecting local revenue performance. Establishment of local revenue databases

was pioneered in Kalangala district local government (DLG) in FY2011/12 and just after one

financial year, local revenue had increased from UShs 98,000,000 million in FY11/12 to

UShs 589,000,000 in FY2012/13.

The objectives of the intervention The objective of this exercise was to provide technical support to LGs to:

23

i) Support local revenue establish computerised database for all the local revenue sources in

the local governments.

ii) Enable the supported local governments establish their local revenue potential based on

the registers developed.

iii) Build the capacities of LGs in local revenue administration.

Activities carried out Commission trained LG officials in the establishment of local revenue database specifically

targeting officers involved in the administration and management both at district and lower

local government levels. Political leaders also participated in the training sessions. The

training mainly focused on:

i) Registration of tax payers and developing registers by local revenue source

ii) Assessment of the annual tax each payer should pay by local revenue source

iii) Capturing the tax payers in the data base by local revenue source.

iv) Effective collection and/or enforcement mechanisms for local revenue collection and

management.

The established databases for local revenue sources have the following benefits to local

governments and other stakeholders.

i) Improve in the quality of data that can guide effective planning and forecasting of annual

local revenue projections.

ii) Enable LGs to capture revenue payments and produce instant reports on registration,

payment and summary reports; and

iii) Promote effective monitoring and review local revenue performance

iv) It is a management tool for decision making on local revenue collection.

During the year under review, the Commission supported 45 LGs7 with skills to establish

databases for all local revenue sources.

Challenges in Establishment of Local Revenue Databases During the provision of technical support to the 45 LGs in the establishment of local

revenue databases, the following challenges were noted:

i) Low staffing levels in LGs is affecting timely collection of data and development of

registers. This challenge is particularly experienced at Sub County and Parish Level, for

example during theperiod under review Kumi DLG had only three (3) substantive sub

county chiefs in post instead of the required seven (7) sub county chiefs and out of the 83

parish chiefs needed only 30% of the Parish Chiefs were in post.

ii) Laxity on the part of the LG staff to collect data and establish the computerized registers.

iii) Local Government Amendment No. 2 Act 2008 stipulate the establishment of Tax

enumeration Committee; Tax Assessment Committee and Tax assessment Appeals

7 Buikwe, Bukedea, Amolatar, Moroto, Napak, Hoima, Kamuli, Kaberamaido, Dokolo, Mpigi, Mityana, Kiboga, Kayuga, Mubende, Kapchorwa, Sironko, Apac, Kitgum, Kisoro, Nakasongola, Kamuli,TC, Kaberamaido TC, Dokolo Tc, Mpigi TC, Mityana, TC, Kiboga TC, Kayunga TC, Moroto TC, Napak TC, Hoima TC, Mubende TC, Kapchorwa TC, Sironko TC, Apac TC, Kitgum TC, Kisoro TC, Nakasogola TC, Kakooge tc, Migyera TC, Namasale TC, Njeru TC, Nkokojeru TC, Lugazi TC, Amolatoar TC, and Buikwe TC.

24

Tribunal Committee. However, these Committees are not in place in most districts

supported due to inadequate facilitation to effectively carry out their functions.

iv) Inadequate transport equipment has limited collection of data in LGs

v) The absence of strong enforcement mechanisms in the mobilization has seriously

weakened collection of local revenue in LGs.

vi) Limited availability of equipment particularly computers and printers for the units of

Local revenue both at higher and lower local governments is making it difficult to capture

data from paper registers into the computer.

Recommendations to Mitigate the Above Challenges

i) In order to address the above challenges, the Commission wrote to the Ministry of Local

Government requesting the Permanent Secretary to direct CAOs to prevail over their staff

to compile and maintain local revenue registers both in soft (database) and hard copies.

ii) The Commission recommended to the Ministry of Finance, Planning and economic

Development that the local revenue database software should have linkages with the other

public finance management reform tools especially the OBT.

iii) The Commission recommended to the Ministry of Public Service and Ministry of Finance

Planning and Economic Development that Local Revenue Units should be established in

the Local Governments

3.2 Analysis of the Trend of Local Revenues The trend in the performance of local revenue for period FY2010/11 to 2013/14 indicate an

improvement from UShs 111 billion in FY 2010/11 to UGX 153 billion in FY 2013/14

against an estimated potential of UGX 334 billion8. Table below shows the performance in

the four financial years.

Table showing Trends of Local Revenue Performance (U shs ‘000)

Source 2010/11 2011/12 2012/13 2013/14

LST 6,542,312 7,115,367 10,786,472 10,113,773,746

LGHT 928,320 1,163,667 1,065,025 1,278,958,104

Property Tax 31,557,087 29,289,945 33,648,810 38,678,504,789

User Fees 21,975,206 20,931,123 29,004,195 34,058,325,346

Licenses 6,564,179 15,559,527 8,807,180 11,036,713,569

Others 43,478,222 43,481,781 56,041,713 57,837,328,767

Total 111,045,327 117,541,410 148,483,957 153,003,604,321

Source: Audited Final Accounts.

Note: Although this report is for FY2014/15, the performance of local revenues is not reflected because the final

accounts were still being analyzed.

8 Local Government Final Audited Accounts

25

3.3 Technical Support for Property Rate Collection

During the financial year under review, the Commission continued to provide technical

support in the collection of property rates to 36 urban LGs. Property rate is one of the major

sources of local revenue for local governments but performance indicate an under collection

currently only at 23% of the estimated potential. LGFC established that poor collection of

property rates in local governments is mainly due to administrative weakness. The technical

support therefore focused on strategies to improve the compilation of property registers,

valuation rolls and collection methods.

The objective of the activity The objective of the intervention of providing technical support was to improve the

performance of property rates for the local governments. The specific objectives were to:

i) Assist urban councils in the identification of uncollected revenues from property rates,

ii) Assist LGs in developing new and update property rate registers and valuation roll

iii) Sensitizing LGs on the legal requirements for preparing and issuing demand notes;

iv) Build the capacities of LGs in property rate administration

A total of 369 urban local governments were supported. The participants included a cross

section of officers and elected leaders including Town Clerks, Head of Finance, Accounts

Assistants, Town Agents, Enforcement staff, Chairpersons LCIII and Secretaries of Finance.

3.4. Challenges facing Local Governments during the implementation

The Commission documented the challenges faced by the local governments in the

administration of property rates collection. They include the following:

i) Enforcement mechanisms in the collection of property rates are very weak

ii) A number of unban council are not regularly updating their valuation rolls hence some

ratable properties are not on the valuation rolls;

iii) The cost of updating valuation roll is very high.

iv) Misinterpretation of the Local Government (Rating) Act 2006 as amended, and in

particular section (4) of the Act where Councils believe that the Valuation roll expires

after five years of their approval while others Councils (most rural urban councils) that do

not know the procedure for collecting property rates.

v) None payment of property rates on central government properties to LGs by Uganda Land

Commission.

3.5. Actions taken by the Commission on the above challenges included: i) The Commission facilitated teams of technical Staff to follow up on the implementation

of property rate collections in the 36 supported urban Councils.

ii) Town Councils have been encouraged to institute Development Forums with

representation from NGOs, Civic and Opinion Leaders and other stakeholders whose

9 Kasilo TC, Migeera TC, Kakumiro TC, Rwebisengo Tc, Lwakhakha TC, Otuke TC, Rubaare TC, Mpondwe TC,Katooke TC,Kaberebere TC,Kakooge TC,Kijura TC, Karugutu TC, Kalungu TC,Kibingo TC, Mateete TC,Ngoma TC, Namayumba TC, Yumbe TC, Maracha TC, Buyende TC, Bullissa TC,Isongoro TC, Buikwe TC,Patongo TC,Agago TC, Ayer TC,Kabuyanda TC, Katerera TC, Bukomero TC, Ntwetwe TC, Rwashamaire TC, Kitwe TC, Nsiika TC, Abim TC and Butemba TC

26

role would be to advise the Town Council on how best it could mobilize and raise local

revenue

iii) The Commission in liaison with MoLG provided LGs with the regulations for property

rate collection to support them in their work.

3.6. Conducting Local Revenue Enhancement Committee Meetings

The Committee was established in 2002 to coordinate policy dialogue on local revenue

enhancement activities in the country. The objective of the Coordinating Committee is to

provide a forum for key stakeholders’ dialogue on issues that would enhance the capacity of

local governments to mobilize, generate and manage sustainable local revenues efficiently

and effectively through co-ordination of decision-making.

Composition of the Committee The Committee chaired by the Commission is composed of different stakeholders who

include: United Nations Capital Development Fund representing the donor community;

Ministry of Local Government; Ministry of Finance Planning and Economic Development

(Tax Policy department); ULGA, UAAU; Ministry of Lands, Housing and Urban

Development (Office of the Chief Government Valuer); Uganda Revenue Authority (URA);

Kampala Capital City Authority (KCCA); Representative of Attorney/Solicitor as an ex-

officio; and Local Governments representatives.

Activities carried out During the year under review, the Commission facilitated three policy dialogue meetings in

which the following was done.

i. Reviewed the legal provisions for local revenue management in local governments and

tasked the Commission to submit the proposals to the Hon. Minister of Local

Government

ii. Recieved and discussed progress on the USMID programme in terms of targets and

funding levels;

iii. Discussed and made recommendations on the implications of the revoked Cess on

produce Licensesand

iv. Management of vehicle parks and markets.

v. Discussed the establishment of fiscal databases and challenges in database management

in local governments and made recommendations.

3.7. Recommendations made

i) Local Revenue registers both in hard and soft copies generated from the data base should

become one of the performance criteria for LGs in the National Annual Assessment Tool.

ii) Ministry of Finance Planning and Economic Development should provide LG further

clarification on VAT waiver on construction materials

iii) An appropriate name should be identified for the charges levied on contracts and forward

it to the Hon. Minister for Local Government for guidance.

iv) Revenue that would be lost by LGs as a result of the revoked licenses and Cess on

produce should be computed and communicated to the Ministry of Local Government for

possible compensation.

27

4.0 ENHANCING THE INSTITUTIONAL CAPACITY OF LGFC TO

PERFORM ITS MANDATE EFFECTIVELY The strategic objective covers functions that include policy analysis and planning,

maintenance and management of the fiscal data bank; human resource management,

strengthening management information system (MIS), improving the corporate image of the

Commission and strengthening the internal systems to ensure economy, efficiency and

effectiveness in the Commission.

4.1. Budget Performance for FY2014/15 During FY2014/2015, the Commission received a total of Shs 4,578 billion of which (i) UShs

0.311 billion was for development (ii) UShs 1,119 billion for wage and, (iii) UShs 3,148

billion non-wage budget respectively.

Budget Performance for FY2014/15 in (UShs billion)

Source: Audited Final Accounts FY 2014/15

Administration The following specific activities were carried out during the year under review,

The Committee held eight (8) meetings to deliberate on matters related to budgeting,

expenditure, reports, procurement and disposal of assets and other human resources matters

including recruitment and appointments of staff in the Commission

4.2 Policy Analysis (Commission Outreach Activities) During the year under review, the Commission carried out one outreach between 10th -15th in

March, 2015. Three districts, namely Nwoya, Arua and Nebbi were visited.

Objective of the outreach The overall objective of outreach was to meet with LG leaders that include the District

Executive Committee (DEC) and District Technical Planning Committee (DTPC) to generate

ideas on Local Economic Development (LED), Commercial Agriculture and Royalties as

potential sources of local revenues for local governments for effective service delivery

provision.

The specific Objectives of the outreach were as follows:

i) Find out the nature and extent of LED initiatives in LGs and how they could contribute to

the LGs revenue.

Approved

Budget

FY2014/15

Released by

end of June

2015

Spent by end

of June 2015

Spent Vs

Revenue (%)

Wage

(Salaries)

1.119 1.119 1.108 99.02

Non-Wage 3.149 3.148 3.145 99.90

Development 0.311 0.311 0.309 99.36

Totals

4.578

4.578

4.562

99.65

28

ii) Find out how comercialisation of agriculture and improved productivity could contribute

to revenue for LGs

iii) Establish which local economic activities could attract payment of loyalties and how LGs

were benefiting from funds acruing from exploitation of natural resources.

The Commission visited the following Projects being promoted by LGs towards improving the

incomes of people.

Projects visited in Arua District Local Government:

i) A banana Plantation in Vurra sub county in Arua district

Projects visited in Nebbi District Local Government:

i) A grain cleaning and sorting plant owned by group of local people registered under the

names “Agency for Accelerated Regional Development”.

ii) MERBER Cooperative Society that deals in rice processing, quality control, sorting,

storage and marketing. They also give extension services to farmers, buy rice from them,

process and help them sell their rice. iii) A women’s mushroom growing project.

During discussions, the Commission noted a number of issues highlighted below.

4.2.1 Local Economic Development inititiatives

Commission noted the following issues:

i) Most of the initiatives under LED are directly supported with inputs supplied by the

NAADS programme but people are not approaching it as an investment strategy from

which they can generate revenue in future for service delivery.

ii) Conceptualisation of the concept of LED is still a problem in the districts visited as some

compare and expect that implementation of LED initiatives should be like other

government projects like NUSAF that have IPFS and budgets for operationalization.

iii) LGs are trying to impliment LED the mindset of the people is still on handout rather than

thinking in terms of investment/entreprenuership.

4.2.2 Commercial Agriculture

It was reported that commercial agricultural activities were increasing. The major crops

grown for commercial purposes include cassave, rice, beans, bananas, maize and others. A

number of people have also engaged in other commercial activities lik poultry, mushroom

growing, bee keeping and honey processing. Most people have formed organised

cooperatives.

Nevertheless, during the discussions, the following challenges were noted:

i) Most Commercial farmers load their produce at night making it difficult for LGs to

collect revenue from them

ii) The different rates being charged on produce by the different LGs are encouraging tax

evasion

iii) Lack of organized markets causes revenue losses to LGs

iv) Poor storage facilities discourage large scale farming and constrains marketing

29

4.2.3 Royalties

All districts are endowed with natural resources but in varying quantities. These include

protected areas like national parks managed by the Uganda Wildlife Authority and electricty

generations sites like Nyagak Power Dam in Arua) but the LG is not benefiting or getting

royalties. It is claimed that the company (WENERECO) belonging to Aghakhan has a 20 year

concession from paying royalties

4.3 Human Resources Management Human Resource Development remains one of the key strategies for the Commission to

increase the proficiency of its staff to fulfill its mandate. During the year under review

the following were achieved:

i) Implementation of a staff health insurance policy was approved but awaiting

harmonization with the proposed national health insurance policy.

ii) The Human Resource Policy was reviewed

iii) Two general staff meetings were held

iv) 1 team building workshop was held.

v) Recruited the following staff; 1 Senior Policy Analyst, 1 Senior Revenue Officer, 1

Revenue Officer, and Senior Stores Assistant.

4.4 Enhancement of the Management Information System (MIS) During the year under review, the Commission enhanced its management information system

by implementing the following:

i) ICT equipment were regularly serviced

ii) Purchased 1 Epson projector

iii) Purchased 1 laptop

iv) Purchased 2 desktop computers

v) Extension of the landline to the resource Center and Board Room to ease communication.

vi) 6 pull banners were designed and printed to enhance the corporate image of the

Commission

vii) Purchased 40 licenses of antivirus

viii) Purchase of one 4WD station wagon Vehicle for the Chairperson

ix) LGFC website was redesigned

x) Distributed reports and publications of LGFC to 19 institutions in order to strengthen

corporate relations and share information.

xi) The 2013 year New Vision and the Monitor newspapers were bound in order to provide a

reference documents.

4.5 Strengthening the Fiscal Data Bank During the year 2014/15, the following activities to enhance the system for assembling and

management of the fiscal databank were undertaken:

i) Data capture, verification and validation exercises were carried out;

ii) The fiscal databank was updated with data from final accounts for districts,

municipalities town councils and sub counties for FY2012/13 and FY2013/14

30

4.6 Implementation Challenges

The implementation challenges that the Commission reported in its previous report have

continued to affect the effectiveness of the Commission. These challenges include:

I. Unclear Government policy direction on the financing of local governments has

affected the conceptualization of measures to improve the state of funding for LGs.

II. Slow process of handling the recommendations from the Review of LG financing

by Local Government Finance Commission.

III. Some Government policies tend to hinder revenue collection from some local

revenue sources.

IV. Insufficient funding for LGFC budget to carry out the planned activities.

V. Political interference especially at LG level in the mobilization of local revenue

and implementation.

31

5.0 BUILDING PARTNERSHIPS AND SYNERGY The Commission continued to work with different state and non-state actors and collaboration

was registered in the review of the National Development Plan and the designing of the

Public Sector Management (PSM) for efficient and effective management of public service

delivery. As a member of the PSM Working Group led by the Office of the Prime Minister,

the Commission participated in the realisation of the achievements below during the period

under review. The Commission continued to collaborate with the National Planning Authority

(NPA) and other MDAs and local governments in the area of Local Government financing.

5.1 The World Bank: Review of Grants Allocation Formulae

The World Bank has supported the work of the Commission to have grants consolidated from

over 50 different grants in FY2014/15 to about 13 in FY2015/16. The grants have been

reviewed to ensure equity and fairness and aligned to sector policy objectives. The process is

ongoing and will be accomplished in FY2016/17.

5.2 FINMAP111: Fiscal Decentralization Architecture (FDA)

The Commission submitted the recommendations from the Review of LG Financing for

possible financing. As a result, the third Financial Management and Accountability

Programme (FINMAPIII) picked the reform activity of designing a Fiscal Decentralization

Architecture (FDA) and determine LG transfers shares out of the national budget. However

due to resource constraint, the two reform areas were programmed for FY2016/17. Under

FINMAP III, the Commission was supported to provide technical support to 18 districts10to

establish fiscal databases for local revenue sources in addition to proving each of them with a

laptop and a printer.

5.3 Participating in Public Sector Management Sector Activities

Through the Government sector wide approach to planning, budgeting, and monitoring and

evaluation, the Commission was able to contribute to planning for the public sector

management where the Commission is a member.

Other recurring activities of the PSM in which the Commission participated in this reporting

period include:

i) Preparation of the annual sector BFPs including agreeing on priority activities for the

sector and institutional challenges/gaps in the financing of respective member institutions;

ii) Policy dialogue and coordination within the PSM sector;

iii) Participation in coordinating the public sector management reforms;

iv) Discussions of priority outputs and indicators for the Sector BFP.

5.4 Facilitating Budget Framework Paper Workshops

The Local Government Budget Framework Paper (LGBFP) Regional Consultative workshops

are an annual exercise which marks the beginning of the budget preparation process for the

next FY for local governments. The workshops are intended to highlight the key policies

that would guide the budget preparation for next FY and at the same time, give an opportunity

to stakeholders to discuss the operational issues which constrain Local Governments in the

10 Arua, Nebbi, Gulu, Lira, Kapchorwa, Soroti, Kumi, Jinja, Mbale, Tororo, Mukono, Masaka, Kabarole,

Kasese, Mbarara, Rukungiri, Bushenyi and Kabale.

32

delivery of public services. These issues in turn are addressed by the relevant Sector Working

Groups at the Centre and Government for broader issues.

The Commission deployed four senior staff to participate in the 2015/16 LGBFP Consultative

workshops as part of a core team of national facilitators and presented a paper on financing

LGs in Uganda.

33

6.0 GENERAL RECOMENDATIONS

The functions of the Commission are basically advisory mainly focusing on the revenue

distribution between the Centre and Local Governments; among local governments and

mobilisation of local government own source revenues for public service delivery. The advice

offered is intended to contribute to the improvement of the state of funding for local

governments to facilitate implementation of their mandates. It is therefore recommended that:

a) For sustainable financing of Local Governments the implementation of the

recommendations of the 2012 study that reviewed the financing of local governments with

respect to adequacy, management and accountability for decentralised services needs to

be prioritised by the stakeholder institutions. In particular, Cabinet and Parliament should

provide special sessions to discuss local government financing issues as one way to

address service delivery constraints in local governments.

b) To enhance Local Revenue generation and reduce the pressure on the central

government transfers, the Commission should be provided with additional funds to

roll out the establishment of local revenue Databases to all local governments.

c) The design of the new Fiscal Decentralization Architecture (FDA) should address the

policies that promote Local Economic Development as a means of creating and

expanding revenue base for LGs.

34

ANNEX 1: STAFF OF LGFC AS AT 30TH JUNE 2015

S/N Name Title

1 Mr. Lawrence Banyoya Commission Secretary

2 Mr. Jim Ashaba-Aheebwa Director Finance and Administration

3 Mr. Adam Babale Director Research and Policy Analysis

5 Mr. Johnson Gumisiriza Principal Revenue Officer

6 Mrs. Christine Kataike Abong Principal Data and Policy Analyst

7 Mr. James Ogwang Principal Revenue Officer

8 Mr. Musa Basajjabalaba Senior Revenue Officer

9 Ms Pricilla Asiimire Senior Revenue Officer

10 Mr. James Ojok Senior Human Resource Officer

11 Mr. Andrew Mugerwa Sewankambo Senior Accountant

12 Mr. James Menya Senior Systems Analyst

13 Ms. Mildred Kasiisa Senior Procurement Officer

14 Mr. Michael Emetu Emodu Senior Management Information Systems Officer

15 Mr. Stephen Musinguzi Senior Internal Auditor

16 Mrs. Jean Bageya Angulo Senior Policy Analyst

17 Mr. Dick Asiimwe Revenue Officer

18 Ms. Patience Akatukunda’ Procurement Officer

19 Ms. Vicky Marcelina Accountant

20 Mrs. Alele Esther Senior Personal Secretary

21 Ms. Cathy Namatovu Lubega Records Officer

22 Ms. Kate Apio Data Officer

23 Ms. Provia Tumukunde Senior Accounts Assistant

24 Ms. Ruth Neikiriza Revenue Officer

25 Ms Maria Nakyagaba Documentation Officer

26 Mr Henry Senyonjo Assistant Stores Officer

27 Ms. Kattie Tushemereirwe Personal Secretary

28 Ms. Miriam Kaseera Receptionist

29 Mr. Jamiru Mugalasi Office Attendant

30 Mr. Francis Isingoma Cleaner

31 Mr. James Birahira Driver

32 Mr. Bakulumpagi Abdullah Driver

33 Mr. James Lugwana Driver

34 Mr. Suleiman Sentamu Driver

35 Mr. Godfrey Kalema Driver

36 Mr. Peter Lwamusayi Driver

37 Mr. Ewan Ogwal Sam Driver

38 Mr. Abby Mukalazi Driver

39 Mr. Emmanuel Malinga Driver Mechanic

35

Annex 2: FY2014/15 PERFORMANCE OF RELEASES TO DISTRICTS BY CATEGORY

(Ushs ‘000’)

Annex 1 : FY 2014/2015 Performance of Releases to Districts by Category (Ushs'000)

Vote District

Wage Recurrent Non-wage Recurrent Domestic Development

Approved Budget

Actual Released

Perf (%)

Approved Budget

Actual Released

Perf (%)

Approved Budget

Actual Released

Perf (%)

501 ADJUMANI 10,428,037 9,711,904 93% 5,208,459 3,654,173 70% 6,547,585 6,293,698 96%

502 APAC 15,800,108 15,325,596 97% 6,960,055 6,509,806 94% 8,826,062 6,508,766 74%

503 ARUA 34,708,311 29,136,243 84% 11,774,600 12,756,377 108% 8,200,991 8,369,331 102%

504 BUGIRI 13,454,579 12,976,342 96% 6,361,344 6,828,621 107% 8,153,907 2,188,938 27%

505 BUNDIBUGYO 12,342,762 12,430,042 101% 7,281,091 5,404,008 74% 3,209,714 2,533,761 79%

506 BUSHENYI 13,528,078 10,847,954 80% 5,916,683 6,027,092 102% 1,558,622 1,310,508 84%

507 BUSIA 12,710,799 12,664,140 100% 5,501,054 5,322,977 97% 7,339,842 3,846,959 52%

508 GULU 15,271,072 15,098,190 99% 9,970,852 9,299,842 93% 7,515,019 6,577,802 88%

509 HOIMA 13,672,873 27,345,746 200% 3,419,286 3,941,006 115% 2,512,305 1,703,112 68%

510 IGANGA 28,866,166 23,854,476 83% 8,914,544 14,386,671 161% 3,251,741 2,587,354 80%

511 JINJA 21,932,000 20,210,007 92% 9,100,747 9,880,705 109% 5,194,824 5,866,637 113%

512 KABALE 30,740,646 29,000,126 94% 10,600,442 11,800,382 111% 2,903,858 1,999,493 69%

513 KABAROLE 18,439,706 17,873,789 97% 9,405,709 9,730,332 103% 2,952,478 2,310,505 78%

514 KABERAMAIDO 9,924,913 4,232,080 43% 2,688,060 2,884,330 107% 3,055,433 2,597,153 85%

515 KALANGALA 4,152,621 4,697,784 113% 3,826,878 3,062,060 80% 2,871,300 2,319,857 81%

517 KAMULI 21,655,277 20,472,218 95% 9,598,552 9,278,272 97% 2,520,581 2,224,398 88%

518 KAMWENGE 12,344,553 12,953,641 105% 5,766,455 5,739,983 100% 2,071,499 1,860,381 90%

519 KANUNGU 14,237,228 11,869,568 83% 9,610,526 7,502,815 78% 2,188,947 1,810,212 83%

520 KAPCHORWA 9,410,659 8,975,718 95% 3,284,218 3,201,526 97% 3,930,209 3,611,840 92%

521 KASESE 27,511,833 26,799,493 97% 15,219,660 14,179,485 93% 3,385,007 3,579,275 106%

522 KATAKWI 7,715,657 7,443,035 96% 4,248,078 3,323,767 78% 6,632,091 4,806,927 72%

523 KAYUNGA 17,713,969 16,015,202 90% 6,898,194 6,860,115 99% 2,442,067 2,297,381 94%

524 KIBAALE 21,741,683 18,425,928 85% 14,072,861 13,504,494 96% 3,710,540 3,154,954 85%

525 KIBOGA 9,328,758 7,851,811 84% 3,956,841 4,224,143 107% 2,426,782 2,394,912 99%

526 Kisoro 19,487,968 7,239,371 37% 6,516,512 3,771,343 58% 1,993,651 1,494,063 75%

527 Kitgum 11,117,219 12,138,995 109% 8,519,150 8,190,737 96% 6,795,606 6,021,856 89%

528 Kotido 4,562,678 3,778,683 83% 2,847,259 2,331,994 82% 3,138,087 2,643,073 84%

529 Kumi 12,795,562 10,147,719 79% 4,133,956 4,001,931 97% 5,070,550 5,464,340 108%

530 Kyenjojo 10,918,245 12,213,696 112% 7,892,127 7,410,483 94% 3,589,241 2,107,286 59%

531 Lira 15,325,238 13,693,987 89% 6,989,630 6,878,981 98% 8,811,803 5,429,722 62%

532 Luwero 29,965,528 25,796,355 86% 7,827,041 9,410,687 120% 3,436,396 3,138,033 91%

533 Masaka 9,531,591 9,490,955 100% 5,406,993 5,164,462 96% 1,473,534 1,298,139 88%

534 Masindi 10,343,461 9,456,383 91% 5,827,070 5,037,200 86% 2,752,302 2,592,818 94%

535 Mayuge 14,844,277 14,665,466 99% 8,457,240 8,032,188 95% 7,514,273 2,342,517 31%

536 Mbale 18,968,436 17,661,099 93% 9,010,109 8,833,762 98% 6,225,112 3,931,948 63%

537 Mbarara 20,567,378 17,648,217 86% 8,850,345 10,348,185 117% 2,398,773 2,038,635 85%

538 MOROTO 6,050,452 5,223,289 86% 3,143,895 3,368,431 107% 3,050,569 2,642,802 87%

539 MOYO 10,084,817 9,134,654 91% 4,227,251 4,096,319 97% 4,633,412 4,117,616 89%

36

540 MPIGI 13,580,205 10,787,137 79% 5,422,154 5,336,900 98% 3,088,213 2,339,951 76%

541 MUBENDE 18,776,571 17,181,140 92% 10,233,272 10,458,900 102% 4,153,497 3,255,193 78%

542 MUKONO 20,820,835 21,157,086 102% 8,932,681 8,811,919 99% 3,183,770 2,813,834 88%

543 NAKAPIRIPIRIT 7,693,997 6,764,685 88% 1,808,835 2,035,478 113% 6,040,320 8,610,766 143%

544 NAKASONGOLA 13,109,340 11,655,428 89% 5,358,184 5,759,803 107% 2,070,147 1,866,779 90%

545 NEBBI 17,006,506 15,334,812 90% 8,850,977 8,811,944 100% 4,443,545 3,374,224 76%

546 NTUNGAMO 1,512,648 1,236,300 82% 1,380,018 1,280,811 93% 1,277,656 1,224,636 96%

547 PADER 9,141,597 9,046,488 99% 7,398,975 5,340,221 72% 6,685,852 6,182,031 92%

548 PALLISA 16,206,569 15,153,822 94% 7,744,607 7,396,974 96% 3,648,649 3,686,771 101%

549 RAKAI 32,668,424 25,674,231 79% 12,185,393 12,153,214 100% 3,321,261 2,838,594 85%

550 RUKUNGIRI 17,303,537 16,976,117 98% 7,482,607 7,644,559 102% 2,225,744 1,885,992 85%

551 SEMBABULE 13,592,703 12,505,122 92% 4,939,170 4,755,248 96% 2,192,145 2,029,023 93%

552 SIRONKO 14,269,283 5,089,237 36% 2,720,590 3,175,344 117% 3,213,788 2,273,647 71%

553 SOROTI 10,187,325 9,255,751 91% 5,781,326 5,012,524 87% 5,108,429 5,634,359 110%

554 TORORO 19,872,988 18,483,810 93% 10,607,311 10,862,258 102% 7,155,157 4,901,031 68%

555 Wakiso 37,899,242 36,488,302 96% 26,293,193 27,611,170 105% 14,610,198 13,003,415 89%

556 YUMBE 17,102,802 13,361,378 78% 6,018,875 6,957,012 116% 7,745,058 6,134,547 79%

557 Butaleja 13,660,447 14,386,706 105% 3,930,126 3,979,736 101% 4,496,760 3,233,887 72%

558 Ibanda 13,109,080 10,299,622 79% 6,299,146 6,106,335 97% 1,799,559 1,585,262 88%

559 Kaabong 6,496,135 5,196,087 80% 3,660,655 4,043,846 110% 4,755,413 3,819,874 80%

560 Isingiro 16,109,635 13,454,859 84% 7,202,476 6,920,114 96% 2,109,516 1,706,769 81%

561 Kaliro 13,574,879 8,817,336 65% 4,417,136 4,932,563 112% 1,968,857 1,617,203 82%

562 Kiruhura 12,450,083 11,685,229 94% 5,965,955 6,237,221 105% 2,137,096 1,923,849 90%

563 Koboko 8,683,046 7,682,601 88% 4,078,028 4,220,731 103% 6,520,130 6,244,803 96%

564 Amolatar 8,011,130 6,801,642 85% 2,654,528 1,634,603 62% 3,642,230 3,645,082 100%

565 Amuria 9,634,169 10,216,904 106% 4,927,210 4,838,980 98% 4,732,696 4,540,155 96%

566 Manafwa 18,768,861 17,358,764 92% 7,411,295 7,904,754 107% 3,681,541 3,493,571 95%

567 Bukwo 8,567,372 6,642,633 78% 3,708,203 3,188,322 86% 1,589,728 1,610,643 101%

568 Mityana 20,098,812 15,324,948 76% 5,763,626 6,086,542 106% 4,035,061 3,022,662 75%

569 Nakaseke 11,702,097 10,793,531 92% 5,406,340 5,981,515 111% 2,283,296 2,622,052 115%

570 AMURU 9,920,034 7,241,815 73% 3,753,946 3,201,748 85% 3,123,547 3,387,859 108%

571 BUDAKA 8,986,760 8,373,934 93% 4,446,871 4,341,173 98% 2,648,460 2,444,436 92%

572 OYAM 15,946,057 5,779,806 36% 3,765,694 4,319,479 115% 4,127,937 3,496,392 85%

573 ABIM 8,906,599 6,593,700 74% 2,631,315 2,619,450 100% 2,777,429 2,375,491 86%

574 NAMUTUMBA 10,869,736 8,579,228 79% 3,982,569 3,804,507 96% 2,402,909 2,215,369 92%

575 DOKOLO 8,474,615 7,689,486 91% 4,244,412 4,218,776 99% 3,236,780 3,343,861 103%

576 BULIISA 5,039,617 3,603,705 72% 2,652,301 3,066,428 116% 5,913,618 4,571,205 77%

577 MARACHA 8,336,354 9,803,978 118% 5,685,657 4,205,649 74% 3,199,615 3,349,016 105%

578 BUKEDEA 10,553,093 9,590,270 91% 5,001,692 4,411,718 88% 3,660,487 4,153,155 113%

579 BUDUDA 9,130,495 9,003,660 99% 2,855,915 3,206,026 112% 3,410,387 3,089,650 91%

580 LYANTONDE 5,090,381 5,016,037 99% 2,460,938 2,717,918 110% 1,576,997 1,488,642 94%

581 Amudat 1,808,471 1,323,543 73% 2,092,208 2,589,111 124% 2,656,428 2,442,677 92%

582 Buikwe 16,776,136 14,057,318 84% 11,500,810 9,840,745 86% 2,709,915 2,206,017 81%

583 Buyende 9,164,611 8,063,840 88% 3,689,500 4,334,312 117% 1,880,562 1,953,592 104%

37

Note variances indicate the need for more training in budget formulation skill and

communication of IPFs from the central government to local governments.

584 Kyegegwa 6,863,531 5,922,275 86% 3,556,101 2,973,637 84% 2,693,538 2,531,468 94%

585 Lamwo 6,910,905 5,340,787 77% 4,869,457 3,740,457 77% 6,000,599 4,620,018 77%

586 Otuke 5,860,166 5,557,362 95% 2,092,074 2,058,670 98% 4,354,047 4,391,196 101%

587 Zombo 10,193,551 8,600,778 84% 4,535,831 3,822,626 84% 3,765,357 2,873,882 76%

588 Alebtong 8,555,271 9,139,311 107% 3,496,523 3,722,733 106% 7,219,088 5,557,380 77%

589 Bulambuli 7,628,730 7,177,301 94% 3,897,124 4,308,446 111% 2,443,114 2,154,626 88%

590 Buvuma 2,553,203 2,626,412 103% 3,703,094 4,046,191 109% 1,288,316 1,031,606 80%

591 Gomba 7,675,584 7,768,695 101% 3,358,834 2,816,918 84% 2,378,013 2,407,705 101%

592 Kiryandongo 9,292,652 8,529,102 92% 3,913,623 3,518,985 90% 5,126,612 4,405,668 86%

593 Luuka 11,097,571 10,290,504 93% 3,693,093 3,643,273 99% 1,713,239 1,586,698 93%

594 Namayingo 7,167,136 6,437,383 90% 4,276,210 4,121,412 96% 2,834,161 2,637,443 93%

595 Ntoroko 4,467,909 3,847,129 86% 3,194,780 3,265,560 102% 2,254,681 1,784,006 79%

596 Serere 11,748,053 11,223,479 96% 4,385,326 4,165,140 95% 4,250,764 4,361,898 103%

597 Kyankwanzi 9,017,899 8,124,483 90% 3,651,107 3,477,583 95% 2,103,219 1,835,363 87%

598 Kalungu 10,555,354 9,631,585 91% 5,080,090 4,641,579 91% 2,665,090 2,369,125 89%

599 Lwengo 11,578,650 11,056,820 95% 4,992,867 4,750,079 95% 2,185,961 1,913,084 88%

600 Bukomansimbi 7,054,978 6,847,834 97% 2,796,843 2,453,764 88% 1,597,418 1,644,308 103%

601 Mitooma 11,127,874 9,727,201 87% 5,349,744 5,338,520 100% 1,112,281 919,384 83%

602 Rubirizi 6,464,893 2,458,057 38% 1,399,297 1,584,455 113% 1,701,961 1,252,919 74%

603 Ngora 8,103,732 7,196,736 89% 3,629,896 3,903,053 108% 4,443,646 3,700,592 83%

604 Napak 5,523,079 4,642,834 84% 4,540,753 4,144,540 91% 3,154,079 2,621,679 83%

605 Kibuuku 8,838,030 8,754,455 99% 3,111,835 3,491,965 112% 2,134,678 2,062,388 97%

606 Nwoya 6,572,552 4,776,800 73% 1,579,136 1,779,837 113% 5,883,282 5,735,606 97%

607 Kole 13,183,926 10,051,067 76% 3,287,847 3,886,587 118% 3,671,265 3,996,918 109%

608 Butambala 9,413,944 7,696,902 82% 2,937,475 2,978,295 101% 2,096,215 2,036,545 97%

609 Sheema 15,319,066 13,288,970 87% 5,396,984 5,144,865 95% 2,214,335 1,977,439 89%

610 Buhweju 4,872,009 4,072,459 84% 1,943,862 1,752,736 90% 2,578,919 2,607,906 101%

611 Agago 10,885,686 10,405,799 96% 6,192,588 5,850,366 94% 5,333,515 4,892,533 92%

612 Kween 6,061,616 2,733,476 45% 1,399,349 1,634,437 117% 2,300,512 1,756,718 76%

TOTAL 1,407,395,966 1,247,957,926 89% 632,842,230 625,552,975 99% 423,023,000 361,321,072 85%

38

Annex 3: FY2014/15 Performance of Releases to Municipal Councils (Ushs ‘000’)

Annex 6: FY 2014/2015 Performance of Releases to Municipal Councils by Category (Ushs'000)

Vote Municipality

Wage Recurrent Non-wage Recurrent Domestic Development

Approved Budget

Actual Released

Perf (%)

Approved Budget

Actual Released

Perf (%)

Approved Budget

Actual Released

Perf (%)

751 Arua MC 4,606,468 4,386,409 95% 4,097,343 3,691,039 90% 7,824,835 4,414,548 56%

752 Entebbe MC 4,828,713 4,290,424 89% 4,836,514 5,460,294 113% 4,803,531 7,100,023 148%

753 Fort-Portal MC 4,501,523 4,277,596 95% 4,720,206 4,009,692 85% 5,803,068 2,895,201 50%

754 Gulu MC 7,304,287 7,124,609 98% 7,216,204 6,369,374 88% 11,578,350 1,452,476 13%

755 Jinja MC 7,285,809 6,432,310 88% 7,981,035 6,560,168 82% 8,401,058 5,853,940 70%

757 Kabale MC 6,129,242 5,094,253 83% 4,346,636 3,640,514 84% 7,523,296 4,898,904 65%

758 Lira MC 4,911,190 5,012,559 102% 5,363,713 3,782,143 71% 13,062,550 4,311,974 33%

759 Masaka MC 4,006,688 2,248,944 56% 4,394,280 4,394,635 100% 8,380,213 7,720,162 92%

760 Mbale MC 7,528,504 4,913,595 65% 2,087,471 2,618,523 125% 4,706,141 652,742 14%

761 Mbarara MC 12,316,840 6,975,602 57% 6,277,405 6,183,680 99% 7,810,946 9,223,906 118%

762 Moroto MC 1,790,621 1,156,440 65% 1,041,931 801,736 77% 3,033,463 3,046,306 100%

763 Soroti MC 5,280,181 5,061,656 96% 3,582,006 3,569,160 100% 13,573,192 4,246,572 31%

764 Tororo MC 4,390,625 2,081,806 47% 493,777 580,308 118% 3,394,263 509,657 15%

770 Kasese MC 6,383,577 6,025,401 94% 2,674,979 2,538,624 95% 2,024,003 1,955,036 97%

771 Hoima MC 4,524,867 4,001,899 88% 4,014,729 3,976,554 99% 10,303,584 8,472,845 82%

772 Mukono MC 6,453,030 6,099,244 95% 4,818,815 4,392,489 91% 781,273 663,493 85%

773 Iganga MC 2,446,598 2,252,686 92% 3,181,773 2,860,529 90% 2,835,420 446,003 16%

774 Masindi MC 4,971,085 1,576,805 32% 1,304,979 1,602,845 123% 843,480 843,480 100%

775 Ntungamo MC 1,512,648 1,236,300 82% 1,380,018 1,280,811 93% 1,277,656 1,224,636 96%

776 Busia MC 2,294,173 2,057,900 90% 2,229,056 2,367,139 106% 1,430,108 1,420,533 99%

777

Ishaka-Bushenyi

MC 4,431,534 4,114,964 93% 2,440,097 2,325,289 95% 476,559 418,154 88%

778 Rukungiri MC 3,392,623 3,218,192 95% 2,294,419 2,582,998 113% 288,983 293,410 102%

TOTAL 111,290,826 89,639,594 81% 80,777,386 75,588,543 94% 120,155,971 72,064,001 60%

39

Annex 4: Conditional Grants Sector Negotiations

The Ministry of Water and Environment

i) Insufficient Environment and Natural Resource Grant. The grant funding is

inadequate and cannot cater for other ENR sub-sector activities other than wetlands.

Issues related to funding for tree planting also need to be addressed.

ii) Insufficient funding for the Sanitation and Hygiene Grant ; MOWE reported that 81

Districts are funded directly by the grant and MOH had committed to provide additional

funds which hasn’t yet been done

iii) Lack of Staffing in form of environment Officers; The DLGs have not yet responded to

the Ministry’s directive that required them to recruit / designate competent environment

officers to take charge of the environment including wetland management at district and

sub-county levels.

iv) Staffing In District Water Offices; Maintaining the required staff in district water

offices remains a challenge to most local governments. The ministry boosted the staffing

status in local governments by seconding engineers to sixteen districts. However these

engineers have not been welcomed in some districts due to political reasons eg. Buliisa,

Bundibugyo.

v) Challenges with District Forestry Services (DFS) Staffing: Not all LGs have recruited

DFOs due to the set structure and yet there is an urgent need to fill these vacant positions

and conduct in-service training as a means of skill development

Ministry of Agriculture Animal Industry and Fisheries

i) Inadequate funding under the Production and Marketing Grant; the available funds

under the grant are too inadequate to cover the operational costs involved to support

Government programmes on wealth creation.

ii) Delayed finalisation of restructuring the Production Department; The Production

structure was approved in 2010 for Headquarter and 2014 for sub-county. However, LGs

received contradicting instructions from MoPS and MAAIF regarding recruitment and it

is still pending up to now. It was agreed that MAAIF, MOFPED and MOPS should

expeditiously resolve and guide the Local Governments on the recruitment and wage

provisions for the approved production structure.

iii) National Agricultural Advisory Services Grant NAADS (NAADS Grant); LGs

generally raised concern over the lack of information on the operational guidelines of the

current restructured NAADS. It was argued that there are no clear roles and relationship

of the various stakeholders, and key players, particularly in the Distribution of inputs to

farmers.

Ministry of Trade Industry and Cooperatives

i) Funding of Commercial Service and Trade Functions in Local Governments; Local

Governments continue to note with concern the meager grants released to the sector. With

the inadequate funding the commercial officers cannot undertake their mandated functions

and be effectives both at the District and Municipal level.

ii) Staffing in Local Governments; There are many districts without substantive

Commercial Officers while others have officers with qualifications which are not relevant

to the TTIC sector.

40

iii) Trade Licensing; It was reported that the amendment of the Trade Licencing Act is

underway. The Tourism, Trade and Industry Committee of Parliament is finalizing the

final report for the 2nd reading to Parliament. It was noted that Trade licensing rates need

to be revised in consultation with the Local Governments. The Trade Licensing

Regulations should be reviewed regularly in response to the prevailing economic

circumstances and in consultation with local governments.

iv) Low or no involvement of LGs in Development of Tourism in respective areas ; The

Local Governments reported that there are efforts at the local government level to boost

tourism although these are not given much support by Ministry of Tourism in terms of

clear sector objectives and guidelines for effective involvement.

Ministry of Health

i) Training and inadequacy of health workers in the Local Governments; The quality of

health workers being passed out by Private Health Training Institutions is of concern to

LGs. Secondly there are several mushrooming nursing schools in the Local Governments

which lack proper regulation and operational guidelines.

ii) Insufficient funding for PHC Capital Development and PHC Non-Wage Grants;

There are insufficient allocations of funds to PHC recurrent activities. However , in light

of the inadequacy of PHC capital development, the Local Governments should identify

alternative measures for construction of staff houses for example community contribution

both cash and in-kind.

iii) Increment of Salaries (PHC – wage); The increment on Medical Officers’ salaries has

caused a rift or demoralized the other officers because in the medical field the health

workers work as a team and complement each other.

iv) Budget Execution Issues; All accounting officers should ensure that all funds carried

forward from the previous year under Local Government Projects are included in their

annual and quarterly work plans for FY 2015/16.

Ministry of Gender, Labor and Social Development

i) Under Funding for Community Based Services Sector: It was noted that the MGLSD had

written to the MoFPED and Parliament Committee on Gender on need to increase funding for

the Sector but had not received any response. It was noted that acknowledgement and

response to issues is a virtue that should be promoted at all levels of Government.

ii) Conditional Grant for Adult Learning; The funding for the FAL activities has remained

the same (Shs1.60Bn) for all LGs yet the LGs have increased in number resulting into

reduced average.

iii) Overwhelming and ever Increasing Number/burden of Orphans and other Vulnerable

Children (OVC); It was noted that remand homes are decentralized but without funding the

necessary equipment. The “chain-linked” approach to solving the problem is not effective at

addressing the problem. It was agreed that the MGLSD shall review the policy on remand

homes including funding

Ministry of Education and Sports

i) Insufficient Universal Primary Education Capitation Grant; This issue has been

outstanding for a long time. MoES request to Finance to increase the grant has not

41

yielded any results. The funding level has almost remained stagnant since 2000

despite inflation and this calls for a policy shift.

ii) Late release of USE Capitation Grant: The funds for second term were released at

the end of the term which affected implementation of education services.

iii) Insufficient Schools Inspection Grant: It was agreed that the MoES shall work

jointly with the Local Governments, LGFC, MOLG and the Local Government

Associations (ULGA & UAAU) to lobby for an increase of the School Inspection

Grant. It was also noted that there is need for effective transport facilitates to

enhance the process of monitoring and supervision in schools.

iv) Lack of Water and Sanitation facilities in schools; It was noted that many schools

lack safe water. Pupils walk long distances to fetch unsafe water. The long distances

affect teacher/pupil contact hours and the unsafe water leads to children falling sick.

v) Automatic Promotion of Pupils has led to low Quality of Primary Education.

Increased poor performance is largely attributed to Head teacher, teacher and pupil

absenteeism, low commitment to work, child labour, lack of school lunch all which

affect attendance of school by pupils.

vi) LGs noted that pupil and student enrolment in schools has continuously been

increasing and yet no teachers are being recruited. In majority of the schools the

number of teachers employed is less than the staff ceiling. The teacher: pupil ratio is

on average 1: 65 in most of the schools which is more than the standard set ratio

1:53, which makes it difficult for teachers to have enough time to interact with all

pupils. In addition, on average the class room pupil ratio in majority of the schools is

1:70 instead of the 1:53, the pupil stance ratio is 1: 74 instead of 1:40 and the desk

pupil ratio is 1:8 instead of 1:3. The low number teachers in a school compromises

the quality of education and time shared between the teacher and pupils.

Ministry of Works and Transport

i) Break down of the Road Equipment; There are reports of continued breakdown of the

road equipment which was attributed to inadequate machine specifications, lack of

trained operators and technicians, poorly trained operators, misuse by LGs and

insufficient funds for repairs.

ii) Attraction and Retention of Engineers; Many Local Governments engineers are not

yet registered and that securing a registered one was very difficult. This has paused

recruitment bottlenecks.

III) Decentralization of the process of Disposal of Old Vehicles; It was noted by local

governments have old vehicle and equipment lying all over in their works yards which

they wanted disposed of. These are occupying a lot of space and continue to depreciate

thereby making government lose money. MoWT was therefore requested to devise an

appropriate strategy for disposal of such items without necessarily having to take the

long and bureaucratic procedure of passing through the Chief Mechanical Engineer

(CME).

IV) Establishment of Rural and Urban Roads Authority; The meeting was informed that

the Ministry was in the process of establishing the Uganda Rural and Urban Roads

Authority (URURA). However, Local Governments noted with concern that this was a

strategy for recentralization, and that the URURA wants to take over the mandate of the

Local Governments and relegate them to handle community access roads.

42

Annex 5: Local Revenue allocation to top 5 Government Priority Areas (UShs ‘000’)

Annex 3: Total Revenue allocated to the Top 5 Government Priority Areas '000 Shs

Vote District Production and Marketing

Health Education Roads and Engineering Water

501 ADJUMANI 990,140 7,980,549 7,896,183 2,030,527

742,576

502 APAC 625,901 859,229 13,681,716 4,569,481

897,116

503 ARUA 1,527,605 6,635,228 34,369,203 2,198,907

831,786

504 BUGIRI 1,013,381 3,736,835 13,004,813 6,673,973

753,517

505 BUNDIBUGYO 1,086,451 4,781,800 11,712,381 1,690,763

754,029

506 BUSHENYI 650,708 3,381,227 12,675,434 1,020,234

374,129

507 BUSIA 909,459 2,192,920 12,748,743 3,791,840

519,193

508 GULU 134,343 1,285,070 8,184,632 20,130,747

509 IGANGA 846,227 4,233,477 11,610,182 1,295,783

501,250

510 JINJA 1,103,438 7,631,731 27,289,279 1,063,252

739,687

511 KABALE 857,352 7,236,138 19,299,267 10,924,140

960,886

512 KABAROLE 1,391,010 6,748,312 28,449,426 1,857,618 1,099,639

513 KALANGALA 1,076,124 4,806,792 15,691,543 2,031,060

848,706

514 KAMULI 1,006,748 2,914,657 9,098,147 1,438,501

404,966

515 KAMWENGE 1,929,769 5,286,932 3,685,576 733,261 435,189

517 KANUNGU 930,444 5,700,944 20,460,197 1,461,772 893,663

518 KAPCHORWA 772,594 2,273,419 11,960,053 1,414,726 455,528

519 KASESE 822,343 4,712,845 14,970,566 1,581,521 416,129

520 KATAKWI 754,823 4,161,778 6,803,919 649,256 515,939

521 KAYUNGA 2,530,380 9,304,837 25,346,450 1,582,387 994,939

522 KIBAALE 730,394 3,237,729 7,201,835 1,392,954 565,373

523 KIBOGA 831,929 3,890,332 16,602,843 1,115,015 643,017

524 KITGUM 1,581,975 4,186,266 20,941,422 4,880,659 589,747

525 KOTIDO 831,336 3,021,347 7,240,311 1,085,704 470,021

526 KUMI 884,061 6,799,621 17,180,803 1,087,525 1,237,710

527 KYENJOJO 1,140,090 4,385,735 11,481,868 1,930,639 1,039,090

528 LIRA 618,877 2,167,530 3,998,616 761,501 983,858

529 LUWERO 923,895 4,915,224 10,790,550 1,978,602 1,020,136

530 MASAKA 2,213,650 3,547,255 9,142,401 4,038,936 921,130

531 MASINDI 1,191,321 3,367,009 16,291,557 1,911,894 1,160,001

532 MAYUGE 861,350 28,248,471 1,468,091 575,937

43

5,340,984

533 MBALE 811,105 2,536,312 9,568,007 626,428 443,006

534 MBARARA 1,025,186 3,719,681 7,649,831 4,338,943 603,846

535 MOROTO 886,833 3,291,519 16,127,374 6,341,164 804,190

536 MOYO 1,443,135 5,566,007 18,462,717 1,274,930 1,553,577

537 MPIGI 978,805 3,175,176 20,161,017 1,220,095 777,592

538 MUBENDE 544,954 2,656,746 5,283,212 762,393 958,647

539 MUKONO 955,911 4,549,923 7,788,760 1,642,504 958,338

540 NAKAPIRIPIRIT 1,528,247 2,994,761 12,915,761 1,068,783 503,178

541 NAKASONGOLA 1,386,893 4,406,844 18,692,205 2,172,174 765,749

542 NEBBI 867,316 3,775,318 20,652,690 1,090,991 715,302

543 NTUNGAMO 668,257 2,795,439 5,400,699 1,427,421 1,138,494

544 PADER 841,641 3,102,160 10,078,208 1,710,016 482,676

545 PALLISA 1,402,218 4,592,250 15,312,223 1,841,930 732,066

546 RAKAI 1,225,201 4,874,234 23,327,377 2,590,322 491,998

547 RUKUNGIRI 1,154,205 4,182,776 9,710,237 2,532,264 1,026,757

548 SEMBABULE 1,169,925 4,473,157 15,018,604 971,123 976,382

549 SOROTI 1,205,280 9,337,291 27,025,814 2,902,995 863,241

550 TORORO 764,967 3,983,507 17,156,464 1,204,635 385,944

551 WAKISO 877,956 1,881,652 12,780,376 1,032,917 808,476

552 YUMBE 1,340,414 3,097,781 12,306,485 1,135,459 623,471

553 BUALEJA 954,617 2,360,352 11,052,669 1,524,754 718,139

554 IBANDA 1,318,881 5,264,313 19,259,241 1,748,562 799,241

555 KAABONG 2,091,899 8,701,768 38,042,343 8,691,547 1,288,395

556 INSINGIRO 1,339,877 5,550,375 14,128,074 4,683,233 899,706

557 KALIRO 680,443 3,250,309 12,571,272 1,537,338 483,833

558 KIRUHURA 961,412 2,975,896 11,802,913 1,335,703 772,742

559 KOBOKO 1,343,538 4,276,749 7,917,458 1,871,279 1,087,780

560 AMOLATAR 834,326 3,133,592 14,582,986 1,569,189 731,210

561 AMURIA 556,156 3,095,366 13,148,146 767,690 482,290

562 MANAFWA 874,655 3,871,369 9,699,415 1,396,922 824,853

563 BUKWO 579,100 2,570,878 8,237,808 1,307,222 863,684

564 MITYANA 521,929 2,014,721 6,801,771 1,302,361 544,016

565 NAKASEKE 923,083 2,867,370 9,345,346 1,433,263 588,085

566 AMURU 1,224,174 3,326,048 17,980,774 1,465,037 813,844

567 BUDAKA 498,246 2,656,210 7,530,822 524,110 506,424

568 ABIM 670,008 6,412,131 16,581,854 1,080,371 513,901

569 NAMUTUMBA 803,382 3,475,135 8,748,189 1,295,529 429,300

570 DOKOLO 538,415 3,353,035 8,645,616 2,645,647 1,425,409

571 BULIISA 581,596 2,012,710 8,859,117 738,017 691,987

572 MARACHA 961,984 3,540,041 18,089,228 1,637,185 1,002,905

573 BUKEDEA 571,751 4,417,663 5,839,903 843,301 1,224,678

575 BUDUDA 533,030 2,504,513 7,733,401 1,382,242 619,904

576 LYANTONDE 440,488 2,237,089 4,106,670 2,577,897 977,167

44

577 AMUDAT 726,191 3,754,836 8,742,300 619,019 813,258

578 BUIKWE 720,316 1,729,133 10,719,518 1,786,010 619,555

579 BUYENDE 702,361 2,770,688 8,163,500 997,354 807,703

580 KYEGEGWA 353,626 2,233,049 3,508,662 567,400 479,179

581 LAMWO 318,735 1,340,450 1,787,055 976,380 799,041

582 OTUKE 835,526 4,616,941 15,011,777 3,094,930 616,233

583 ZOMBO 481,986 1,625,324 9,430,905 692,451 542,952

584 ALEBTONG 850,934 2,301,989 6,075,334 1,226,509 414,908

585 BULAMBULI 963,704 2,848,777 8,573,730 3,362,376 1,610,761

586 BUVUMA 500,125 2,209,551 4,918,518 1,630,432 619,619

588 GOMBA 636,692 2,258,355 8,319,588 3,415,815 631,593

589 KIRYANDONGO 808,583 2,119,249 6,107,930 658,101 416,567

590 LUUKA 540,293 1,622,168 1,045,456 711,961 463,590

592 NAMAYINGO 879,515 2,245,959 8,080,742 1,761,369 797,109

593 NTOROKO 437,138 1,395,331 11,458,119 633,590 509,166

594 SERERE 933,514 1,790,973 7,004,628 817,014 555,770

596 KYANKWANZI 606,571 2,526,983 11,603,303 1,772,089 758,240

598 KALUNGU 310,350 3,041,155 10,870,685 846,015 373,268

600 LWENGO 359,093 1,542,077 6,962,614 761,037 395,763

601 BUKOMANSIMBI 541,775 1,306,377 10,988,509 1,304,624 412,726

602 MITOOMA 456,536 1,066,505 5,047,148 657,192 568,384

603 NGORA 938,998 2,373,113 7,530,405 1,291,396 635,660

604 NAPAK 662,551 3,015,469 3,725,607 1,404,546 697,638

605 KIBUUKU 467,468 1,254,331 8,735,029 366,250 639,481

607 NWOYA 517,802 3,107,416 11,557,804 1,696,228 694,528

608 KOLE 241,845 1,793,594 9,534,678 528,928 378,689

609 BUTAMBALA 791,019 2,845,601 14,843,253 1,207,168 415,369

610 SHEEMA 450,677 1,026,320 4,364,082 1,131,106 513,996

611 BUHWEJU 831,791 4,489,049 10,336,475 1,680,956 671,342

612 AGAGO 768,319 1,675,610 4,908,824 703,819 626,292

TOTALS 92,283,591 371,510,292 1,264,137,642 209,339,220 74,725,690

45

ANNEX 6: Status of implementation of the policy issues related to mobilization of local

revenues in LGs

(a) The Review of Legal Provisions for Local Revenue Management in Local

Governments:

The following proposed legal provisions for review were submitted to the

Parliamentary Committee on Public Service and Local Government that was

reviewing the Local Government Amedment Bill 2014.

Local Service Tax

The Local Government Finance Commission recommended to Government to:

Revise the current law on Local Service Tax by increasing its (minimum) threshhold

from shs. 5,000 to shs. 20,000 and the maximum to remain at shs;100,000/=.

Remove exemptions on eligible taxpayers such as petty food vendors, bodaboda cyclists

and sole petty artisans to widen tax base.

Local Government Hotel Tax

The Local Government Finance Commission recommended that the law be reviewed as

follows;

Local Governments be given the discretion to decide on the remittance period which

may vary from weekly to monthly depending on the category.

Strengthen enforcement provisions by making it mandatory for the hotel owners to

provide records of hotel usage to LGs on regular basis e.g after every two days.

Agency Fee

On collection of WHT and VAT, the Commission recommended that the Income Tax

Act (CAP 340) should be amended to reflect the provision for agency fee of 20% to be

paid to LGs.

Fish Licenses

The Commission recommended that the Act should be reviewed to provide for revenue

sharing framework where 40% to be paid to local governments.

Royalty Fee from Eletricity Generation

Under Electricity Act, 1999 section 75(7,8 & 9), the LG states that taking a royalty has

to be a district LG only. The Commission recommends that the word district LG should

be changed to read district or Urban LG, to provide a clear rate to avoid leaving the

parties to negotiate the share, the rate for royalties agreed upon to be reviewed

regularly for a certain period, and a penalty should be included in the provision to the

investor who has defaulted payment of the royalty fee to a LG.

Royalty fee from Minerals

The Mining Act, 2003 (Section 98(1) (2) does not provide for the sharing of the

information and therefore, the LGs cannot know what is due to them. Also the payment

schedule is not explicit making it difficult for the local governments to budget for the

royalty funds. The Commission recommended that the Act should be reviewed to

provide for sharing of information and schedule for payment of royalties.

46

Park Entry Fees

Uganda Wild Life Act, 1996(CAP 200) section 69 (4) allows LGs to receive 20% of the

revenues from the park entry fees only and yet there are other revenue generating

activities such as licensing for small scale mining, rafting andothers that are issued by

UWA. The Commission recommended that the section should be reviewed to include

other licenses issued by UWA for other activities like small scale mining, rafting among

others.

Royalties to LGS from Central Forest Reserves.

The Commission recommended that the Act should be reviewed to include a provision

of royalties to the LG where the forest is situated and the Statutory Instrument first

shedule part A on forest produce fee should be amended to adjust the current fees on

forest produce to align with the current market prices for forestry products.

Veterinary fees (Movement Permits)

Statutory instrument No. 38-4(11) of the Animal Disease Act; all the veterinary fees

(Movement Permits) being collected by the LGs are sent to the central government, yet

these should be LG revenues. The Commission recommended that the statutory

instrument should be reviewed to allow local governments have a revenue sharing of

40% of this revenue.

Business License

There are weak enforcement mechanisms for the collection of business licences. The

Local Government Finance Commission recommended that the Local Government

Act ( Cap 243) should be reviewed to allow LGs to recruit their own Enforcement

Officers /Local Police Or hire police.

Local Revenue Databases for Local Governments Local Government Finance Commission wrote a letter to the Permanent Secretary of

Ministry of Local Government requesting to issue a circular to all Local Governments

to prepare revenue registers as a statutory requirement for Local Revenue collection.

The letter was written and circulated to all Chief Administrative Officers and Town

Clerks

Revoked licences and Cess on produce Local Government Finance Commission wrote a letter to the Permanent Secretary of

Ministry of Local Government requesting for compensation of shs. 19.2 billion as

revenue that would be lost as aresult of revoked sources.

Update to the forum of CAOs on the Establishment of Databases The Local Government Finance Commission incorporated the updates on the

establishment of databases in the presentation paper during the JARD meeting.