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KWAME NKRUMAH UNIVERSITY OF SCIENCE AND

TECHNOLOGY, KUMASI

COLLEGE OF ART AND SOCIAL SCIENCES

KNUST SCHOOL OF BUSINESS

Challenges and prospects of fiscal decentralization in Ghana:

A case study of the Wa Municipality

BY

BA-INGE MATHIAS

IB-KU ROLAND

KARIMU NASHIRU

SEIDU ABDUL-KUDUS

MAY, 2012



i

KWAME NKRUMAH UNIVERSITY OF SCIENCE AND

TECHNOLOGY, KUMASI


KNUST SCHOOL OF BUSINESS

Challenges and prospects of fiscal decentralization in Ghana:

A case study of the WA Municipality

A Dissertation

Presented to the KNUST School of Business in Partial Fulfillment of the

Requirements for the award of BSc. Business Administration degree

TITLE PAGE

BY

BA-INGE MATHIAS

IB-KU ROLAND

KARIMU NASHIRU

SEIDU ABDUL-KUDUS

MAY, 2012



ii

DECLARATION

We declare that this long essay is our original work and has not been presented, either

whole or in part, for any purpose anywhere. To the best of our ability, we have duly

acknowledged information from other sources.

NAME INDEX NUMBER SIGNATURE DATE

BA-INGE MATHIAS 2502808 ……………… …................

IB-KU ROLAND 2505108 ……………… …................

KARIMU NASHIRU 2505408 ……………… …................

SEIDU ABDUL-KUDUS 2510008 ……………… …................

SUPERVISED BY:

MR. KWAME MIREKU ……………….. …................

SIGNATURE DATE

CERTIFIED BY:

MR. J. M. FRIMPONG ……………….. …................

SIGNATURE DATE



iii

DEDICATION

We dedicate this work to our beloved parents; Mr. Joseph Ba-inge and his wife Mrs.

Georgina Ba-inge, Mr. Haruna Seidu and his wife Seidu Asana, Mr. Maalu Albanus

and his wife Dery Basilia, Mr. Wadjia Karimu and his wife Adamu Safia with whose

support and encouragement this work has come to reality.



iv

ACKNOWLEDGMENT

All praises and thanks are due to God, the most gracious and the most merciful, who

has given us knowledge, protection and guidance throughout our education.

Our profound gratitude goes to Mr. Kwame Mireku, a lecturer in the KNUST School

of Business, who supervised this work and whose guidance has made this study a

success. To all lecturers of the KNUST School of Business, we thank them for

making our university education a reality.

Also, our sincere thanks go to the staff of the Wa Municipal Assembly especially

Hon. Duogu Yakubu, the Municipal Chief Executive and Mr. Dabuo Julius, the

Municipal budget officer who contributed in diverse ways in assisting us to get data

for this project. We say may God bless them.



v

ABSTRACT

The need for growth and development at the grass-root level has necessitated the concept

of local government and decentralization in Ghana. Under the Local Government Act,

1993, (Act 462), District Assemblies are responsible for the development and the general

needs of the local communities. This has resulted in high expectations towards

development from the local communities. Whiles significant progress has been made

towards the other facets of decentralization; fiscal decentralization seems not to be

progressing. The resources provided by central government to the district assemblies are

not always sufficient to meet the developmental expectations of the people hence, the

need for district assemblies to mobilize revenue from internal sources to supplement the

transfers from the central government. It is however not uncommon to see district

assemblies generating revenue below their revenue needs and targets.

The study covers all the eight towns in the Wa Municipality. Out of this population, a

sample of one hundred and fifty (150) was selected. Quotas of one hundred and twelve

(112), twenty (20) and eighteen (18) were assigned to the general public, revenue

collectors and the assembly’s staff respectively. Purposive sampling was used for the

assembly’s staff, whiles convenience sampling was used for both the general public and

the revenue collectors.

The study identifies several challenges to fiscal decentralization and remedies for

overcoming them. For the fiscal decentralization policy to achieve its intended objectives

the central government and MMDAs in Ghana need to adopt measures such as: an

adequate enabling environment, assignment of an appropriate set of functions to local

governments, assignment of an appropriate set of local own-source revenues to local

governments and the establishment of an adequate intergovernmental fiscal transfer

system.



vi

TABLE OF CONTENTS

TITLE PAGE .................................................................................................................. i

DECLARATION ........................................................................................................... ii

DEDICATION ............................................................................................................. iii

ACKNOWLEDGMENT............................................................................................... iv

ABSTRACT ................................................................................................................... v

TABLE OF CONTENTS .............................................................................................. vi

LIST OF TABLES ....................................................................................................... xii

LIST OF FIGURES ..................................................................................................... xii

LIST OF ABBREVIATIONS AND ACRONYMS .................................................. xiii

CHAPTER ONE ............................................................................................................ 1

INTRODUCTION ......................................................................................................... 1

1.1 Background of the study .......................................................................................... 1

1.2 Problem Statement ................................................................................................... 3

1.3 Research Objectives ................................................................................................. 5

1.4 Research Questions .................................................................................................. 5

1.5 Significance of the study .......................................................................................... 5

1.6 Scope and limitations of the study ........................................................................... 6

1.7 Organization of the study ......................................................................................... 6

CHAPTER TWO ........................................................................................................... 8

LITERATURE REVIEW .............................................................................................. 8



vii

2.1 Introduction .............................................................................................................. 8

2.2 Definition of key concepts ....................................................................................... 9

2.3 Overview of Fiscal Decentralization in Ghana ...................................................... 10

2.4 Objectives and implications of fiscal decentralization in developing countries .... 12

2.5 Arguments for fiscal decentralization .................................................................... 12

2.6 Extent of decentralization of fiscal powers ............................................................ 14

2.7 Effectiveness of fiscal decentralization ................................................................. 16

2.8 Challenges of fiscal decentralization in developing countries ............................... 17

2.8.1 Intergovernmental transfers ................................................................................ 18

2.8.2 Expenditure management and financing ............................................................. 18

2.8.3 Adequacy of local revenues and autonomy ........................................................ 19

2.8.4 Local government borrowing .............................................................................. 19

2.8.5 Budget discretion ................................................................................................ 20

2.9 Prospects of Fiscal Decentralization ...................................................................... 22

2.9.1 An Agenda for Reforming Expenditure Assignment and Management ............. 23

2.9.2 An Agenda for Improving Local Revenue Generation and Autonomy .............. 24

2.9.3 An Agenda for Reforming Intergovernmental Transfers .................................... 24

2.9.4 Local Government Borrowing and Investment Finance ..................................... 25

2.9.5 Better Framing of Institutional Reform .............................................................. 26

2.10 History of decentralization in Ghana ................................................................... 26

CHAPTER THREE ..................................................................................................... 28



viii

METHODOLOGY ...................................................................................................... 28

3.1 Introduction ............................................................................................................ 28

3.2 Research methods .................................................................................................. 28

3.3 Data sources ........................................................................................................... 28

3.3.1 Primary sources of data ....................................................................................... 28

3.3.2 Secondary sources of data ................................................................................... 29

3.4 Sample Population and Sample Size...................................................................... 29

3.5 Sampling techniques .............................................................................................. 29

3.6 Data Collection Instruments .................................................................................. 30

3.6.1 Interview ............................................................................................................. 30

3.6.2 Questionnaires..................................................................................................... 31

3.7 Data Analysis Tools ............................................................................................... 31

3.8 Profile of the Wa Municipal Assembly ................................................................. 32

CHAPTER FOUR ........................................................................................................ 36

DATA PRESENTATION AND ANALYSIS ............................................................. 36

4.1 INTRODUCTION ................................................................................................. 36

4.2 THE EXTENT OF DECENTRALIZATION OF FISCAL POWERS .................. 36

4.2.2 Power to generate and use revenue ..................................................................... 37

4.2.3 Power to prepare and approve budgets ............................................................... 38

4.2.4 Restrictions on the use of the DACF .................................................................. 38

4.3 EFFECTIVENESS OF FISCAL DECENTRALIZATION ................................... 40



x

CHAPTER FIVE ......................................................................................................... 60

SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION ........ 60

5.1 INTRODUCTION ................................................................................................. 60

5.2 SUMMARY OFFINDINGS .................................................................................. 60

5.2.1 The extent of decentralization of fiscal powers .................................................. 60

5.2.2 Effectiveness of fiscal decentralization .............................................................. 61

5.2.3 The challenges of fiscal decentralization ............................................................ 61

5.2.4 Remedies to the challenges of fiscal decentralization ........................................ 62

5.2.5 Prospects of fiscal decentralization ..................................................................... 64

5.3. Recommendations ................................................................................................. 65

5.4 Recommendation for further research ................................................................... 66

5.5 Conclusion ............................................................................................................. 66

REFERENCES ............................................................................................................ 68

APPENDIX .................................................................................................................. 72



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LIST OF TABLES

Table 4.2.1 The assembly’s power to borrow and its restrictions .............................. 36

Table 4.2.2 Assembly’s power to prepare and approve its budgets ............................. 38

Table 4.3.1 Budgeted and actual revenue for 2009 and 2010 ..................................... 40

Table 4.3.2 Level of education of revenue collectors .................................................. 43

Table 4.4.1 Challenges The Assembly Faces In Mobilizing Revenue ........................ 46

Table 4.4.2 challenges faced by tax payers in paying taxes ........................................ 48

Table 4.5.1 Measures to overcome assembly’s challenges in borrowing funds .......... 50

Table 4.5.2 Measures to overcome the challenges revenue collectors face................ 53

Table 4.5.3 Measures to overcome the challenges the assembly encounter in preparing

its budgets .................................................................................................................... 55

Table 4.5.4 Measures to overcome challenges faced by taxpayers in paying taxes .... 56



xii

LIST OF FIGURES

Figure 4.2.1 Apart from borrowing, does the assembly have power to generate and

use its own revenue? .............................................................................. 37

Figure 4.2.2 Restriction placed on the use of the DACF ........................................... 39

Figure 4.3.1 Does the assembly always meet its budget plans? ................................ 41

Figure 4.4.1 Challenges the assembly encounters in acquiring loans ....................... 43

Figure 4.4.2 Challenges the assembly face in preparing its budgets ......................... 45

Figure 4.4.3 Challenges faced by revenue collectors in collecting revenue .............. 49

Figure 4.5.1 Measures to be put in place to ensure effective revenue generation ..... 52



xiii

LIST OF ABBREVIATIONS AND ACRONYMS

BoG Bank of Ghana

CPP Convention People’s Party

DACF District Assemblies Common Fund

DAs District Assemblies

DDF District Development Facility

DPs Development Partners

FAD Financial Administration Decree

GTV Ghana’s Television

IRS Internal Revenue Service

L.I Legislative Instrument

MCE Municipal Chief Executive

MMDAs Metropolitan, Municipal and District Assemblies

MTDPs Medium-Term Development Plans

PNDC Provisional National Defense Council

PNDCL Provisional National Defense Council Legislation

SMCD Supreme Military Council Decree

SNGs Sub-National Governments (SNGs)

SPSS Statistical Package for Social Sciences

T-Z Tuo–Zaafi

USAID United States Agency for International Development



1

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The decentralization of authority and responsibility for public services provision to

local government is an essential part of the overall governance and development

strategy in many developed and developing countries around the world. Some

countries, organizations and institutions have recognized the need for decentralization

as a tool to enhance the effectiveness and efficiency of their operations. Development

partners, district assembly functionaries, donors, academia and the local communities

have stressed the need for decentralization. This will increase economic efficiency

and allow greater differentiation in the provision of public services due to improved

preference matching and government accountability (Bardhan and Mookherjee 2006;

Lockwood 2006). This thus reflects the belief that because local governments are

closer to the people than the central government, they will be better informed about

the preferences and circumstances of the residents; therefore, decentralization can

improve allocation efficiency in the sense that the services provided by local

governments will be better matched with the preferences of their populace; and local

people might be better informed about the actions of local government; therefore, they

will be in a better position to hold their government more accountable.

The idea of decentralization in Ghana started during the colonial era. The colonial

masters (the British) adopted indirect rule to govern the Gold Coast colony through

local authorities. These local councils or authorities were responsible for the

oversight of public health, peace and order and the imposition of taxes and levies for

development at the grass root or local level.



2

Since independence, succeeding governments in Ghana have regarded

decentralization as a necessary condition not only for socio-economic development,

but also to achieve political objectives such as legitimacy and (paradoxically)

recentralization of power (Ayee 1994; 2004; 2008a). This is evidenced by over ten

(10) commissions and committees of enquiry established to look at decentralization

reforms. The introduction of the assembly system of local government in 1988 with

the passage of the Local Government Law, PNDCL 207 and its successor Local

Government Act, 1993 (Act 462) brought into being local authorities known as

Metropolitan, Municipal and District Assemblies (MMDAs) with legislating,

executing, budgeting, planning and rating powers.

In trying to carry out their duties, MMDAs encounter certain problems and challenges

including little fiscal autonomy and greater control by central government among

others. The then Upper West Regional Minister, Alhaji Isahaku Salia in his speech at

the launch of a four day public hearing of composite budgets for the various

Municipal and district assemblies in the Region, targeting coordinating directors,

planning officers and municipal and district finance officers which was published

on14th

October, 2011, observed that though Ghana’s decentralization programme

started in 1988, its fiscal component, which is a prime facilitator of the entire

decentralization policy, has been rather slow in changing. He said fiscal

decentralization involves a level of resource allocation to local government which

would allow it to perform decentralized functions, that is why according to him: “The

composite budget approach has been adopted to facilitate the transfer of resources to

the metropolitan, municipal and district assemblies”.Dr. Esther Ofei Aboagye, the

director of the institute for local government studies in her words at the Brong Ahafo

regional consultative forum for decentralization, indicated that several improvements



3

have been made in almost all areas of decentralization except fiscal decentralization.

This was resounded by the GTV’s regional diary on December 12, 2009. Ahwoi

(2000) and Nuama (2003) noted this earlier in their works. The decentralization

programme of Ghana has been anchored on four main inter-related pillars including:

Political Decentralization, Administrative Decentralization, Decentralized Planning

and Fiscal Decentralization. A widely cited World Bank report states that an effective

public sector in a modern developing country depends on the ability of the central

government to harness the resources of lower levels of government (Cochrane, 1983).

The over-reliance of local governments on central government transfers, which are

usually not predictable in terms of timing and magnitude, raises issues of concern.

Central government, development partners, district assembly functionaries, and the

local communities have become increasingly disturbed by the current state of fiscal

decentralization in Ghana. Whilst Ghana has made tremendous progresses towards

political, administrative and decentralized planning, a lot of problems and challenges

still need to be addressed especially in the area of fiscal decentralization. Fiscal

decentralization is defined as the ceding of expenditure and revenue mobilization

functions by the central government to MMDAs. Decisions about revenue generation

and expenditure are transferred from the central government to the local level. The

local units prepare tax collection models (Ahwoi 2009). This study thus, seeks to

examine the prospects and challenges of fiscal decentralization in Ghana using the Wa

Municipality as a case study.

1.2 Problem Statement

Fiscal decentralization is seen all over the world as an effective tool for good

governance and development. Since independence, succeeding governments in Ghana

have tried to exploit this tool by advancing the fiscal decentralization programme. The



4

introduction of the local government structure was therefore to transfer authority and

power to the MMDAs to enhance effective and efficient governance.

It is however interesting to note that most MMDAs in Ghana are unable to meet their

revenue generation targets because of central government’s restrictions and other

internal factors. This problem is more serious among the municipal and district

assemblies of which Wa Municipality is no exception. The Municipality’s inability to

generate enough funds from its internal sources makes it depend more on external

sources like the District Assemblies Common Fund (DACF) and donations for

development. The main problem with this issue is that, as the needs of the populace

are on the increase, the resources needed to fulfill these needs are not sufficient. As a

result the Municipality mostly depends on central government for funds to carry out

its developmental projects. However, the amount and timing of these inflows from the

central government is unpredictable and this retards the rate of development in the

Municipality. Though Ghana’s decentralization program started in 1988, its fiscal

component, which is a prime facilitator of the entire decentralization policy, has been

rather slow in changing. This is because MMDAs in Ghana are not completely

fiscally independent from the central government and their financing do not

commensurate with their responsibilities. The revenue raising powers given to

MMDAs are inadequate and as a result, local authorities depend mostly on central

government for funds to carry out their developmental projects and also the

responsibility for budgets preparation, administration and control of budgetary

allocations to the various departments is impeded hence the need for this research.



5

1.3 Research Objectives

The general objective of this research is to examine the challenges and prospects of

fiscal decentralization in Ghana. From the general objective, the following specific

objectives have been formed:

1. To find out the extent to which fiscal powers have been decentralized in the Wa

Municipality.

2. To assess the effectiveness of fiscal decentralization in the Wa Municipality.

3. To examine the challenges of fiscal decentralization within the Wa

Municipality.

4. To examine the prospects of fiscal decentralization in Ghana.

1.4 Research Questions

1. What is the extent of decentralization of fiscal powers in the Wa Municipality?

2. How effective is fiscal decentralization in the Wa Municipality?

3.

What are the challenges of fiscal decentralization within the Wa Municipality?

4. What are the prospects of fiscal decentralization in Ghana?

1.5 Significance of the study

The study is aimed at bringing to bare the challenges and prospects of fiscal

decentralization. This stems from the fact that little attention has been given to fiscal

decentralization as compared to all the other forms of decentralization. This study

seeks to identify the challenges of fiscal decentralization in the Wa Municipality and

ways of overcoming them. The study also seeks to bring on board development

partners and central government to undertake an effective economic planning in

promoting adequate development. It will also enable them to perform effectively

despite changing international economic conditions and structural adjustment



6

programmes designed to improve public sector performance which have created

serious fiscal difficulties for developing countries of which Ghana is no exception.

Also, the study will emphasize the need for fiscal autonomy in Ghana (the transfer of

fiscal powers from central government to MMDAs). This study also seeks to provide

some of the measures that can be put in place in order to ensure effective fiscal

decentralization in Ghana.

1.6 Scope and limitations of the study

The study area includes the Wa regional administration, the area councils of the

municipality, the eight main markets and selected communities within the

municipality.

As a result of the scattered nature of the geographical area, the study was limited by

the inability to cover all towns and villages. The study was as well limited by the

unwillingness of some citizens to provide information on their activities as it hammers

on revenue and tax activities. Coupled with this was the difficulty in administering of

the questionnaires due to inability of some citizens to respond to the questionnaires

especially the traders, businessmen and women owing to the busy nature of their

activities.

1.7 Organization of the study

The study is organized into five chapters which are summarized as follows: Chapter

one is made up of the background of the study, problem statement, research

objectives, research questions, significance of the study, scope and limitations of the

study and the organization of the study. Chapter two highlights on the literature

review related to the topic of the research. This covers the introduction, the definition

of key terms, history of fiscal decentralization in Ghana, overview of fiscal



7

decentralization in Ghana, Prospects of Fiscal Decentralization, Objectives and

implications of fiscal decentralization in developing countries, arguments for fiscal

decentralization, and challenges of fiscal decentralization. Chapter three deals with

the method of the research which covers the sources of data, the population and

sample of the study, methods of data collection and analysis, and the background to

the study. Chapter four is concerned with data analysis to achieve the objectives of the

study. It covers the analysis of secondary data, the primary data and the qualitative

analysis. Chapter five encompasses the summary of the findings of the research,

recommendations and finally, conclusion.



8

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter deals with a review of information with regard to the topic of study. It

brings to bare already existing knowledge that has been published by other writers

and researchers on fiscal decentralization. It also provides a general overview of

decentralization and the challenges and prospects of fiscal decentralization.

Public service delivery by sub-national governments (SNGs) in many African

countries is tightly linked to subventions from central government. Inflexible transfer

systems that are rarely well defined often constrain the ability of local governments to

plan and to efficiently deliver basic public services, especially education and health.

Meanwhile, on-going political reforms on the continent will inevitably involve more

decentralization, where local governments are assigned greater responsibilities of

delivering key development projects and public services. This process should include

legal and administrative reforms that facilitate planning at the local government level,

in terms of identification of opportunities and mobilization of local as well as external

resources, including private savings, to meet the development goals of the local

community (Adam, 2007).

Prof J E A Mills the then vice president of the Republic of Ghana in his opening

address on the forum; “a decade of decentralization in Ghana retrospect and

prospects” in 2000, states; “Global trends in governance present many challenges for

governments and the governed alike. The demands of the governed are clearly for

satisfaction of their basic needs and rights and responsibilities for participation and

self-realization. Those who govern, on the other hand are constrained by what is



9

possible within the limitations of available resources and competing demands of

interest groups. The best way to reconcile these two viewpoints is to make the people

part of the decision making process through decentralization”.

2.2 Definition of key concepts

According to Rondinelli (1983), decentralization is defined as “the transfer or

delegation of legal and political authority to plan, make decisions and manage public

functions, from the central government and its agencies to field organizations of those

agencies”.

Ayee (2003) stated that, “decentralization is the transfer of responsibility (authority)

and resources (human and financial) and accountability from central government to

local self- governing entity. This involves long process of political, fiscal and

administrative decentralization. When only responsibility or authority is transferred

but not resources-there is de-concentration. When responsibility and resources are

transferred, there is delegation. When there is transfer of responsibility, resources and

accountability (partially or completely) there is devolution or democratic

decentralization”. According to Ayee, (1992) decentralization can be seen in the

following perspectives;

a. Devolution: “the legal conferment of powers upon formally constituted local

authorities to discharge specific or residual functions. Authority for making

decisions on certain issues is vested in sub-regional units of government and

central government”.

b. De-concentration: “a minimal transfer of power that is needed for decision

making on the spot although some latitude is given for routine decision

making. Field staff remained employees of the center and the center sets broad



10

guidelines within which the field is administered. Other names for de-

concentration are administrative decentralization, field decentralization and

bureaucratic decentralization”.

c. Privatization: “the transfer of activities formally performed by state agencies

to private sector thereby reducing the role of government. Privatization also

involves the market provision of goods and services”.

Atakora, (2006) defined decentralization as “the transfer of power and authority from

the central government to sub-units either by political, administrative, economic and

fiscal means.”

Fiscal decentralization is defined as the ceding of expenditure and revenue

mobilization functions by the central government to MMDAs. Decisions about

revenue generation and expenditure are transferred from the central government to the

local level. The local units prepare tax collection models, Ahwoi (2009).

According to Ahmed et al (2005: 6), fiscal decentralization has four major

components:

(1) Allocation of expenditure responsibilities by central and local governments;

(2) Assignment of taxes by government tiers;

(3) The design of an intergovernmental grant system; and

(4) The budgeting and monitoring of fiscal flows between different government tiers.

2.3 Overview of Fiscal Decentralization in Ghana

Fiscal decentralization entails entrusting local government units with the authority and

capacity to generate, allocate and utilize financial resources to promote socio-

economic development. According to Kokor and Kroes (2000), the objectives of

Ghana’s decentralization programme are to increase local revenue mobilization,



11

restructure allocation of resources to meet local needs and empower MMDAs to make

allocation decisions at the local level over both locally generated funds and those

transferred from the central government.

In furtherance of these objectives, the District Assemblies Common Fund was

established and has been in operation for over a decade. The allocations to each

MMDA are based on a formula approved by Parliament. Disbursements are made on

a quarterly basis and a quarter in arrears. The DACF is available to MMDAs only for

investment expenditure. In 2008, the proportion of total government revenue allocated

to the DACF was reviewed from 5% to 7.5 %. All MMDAs can only receive their

allocations upon the submission of their Annual Action Plans and Annual Budgets to

the Administrator of the DACF. MMDAs have also been mandated under section 245

of the 1992 Constitution and Act 462 to collect fees, fines, rates, tolls and licenses in

order to support socio-economic development in their areas. Further to this, several

legal instruments have been enacted to ensure transparency and accountability in the

use of financial resources at the local level. These include:

• Financial Administration Act, 2003 (Act 654, amendment to FAD, 1979,

SMCD 221)

• Financial Administration Regulations, 2004 (L.I. 1802, revoking the Financial

Administration Regulations, 1979, L.I. 1234)

• Public Procurement Act, 2003 (Act 663)

• Ghana Audit Service Act, 2000, (Act 658)

• Internal Audit Agency Act, 2004 (Act 656),



12

2.4 Objectives and implications of fiscal decentralization in developing countries

Literature indicates that only a few developing countries have adopted comprehensive

political, fiscal and administrative decentralization. Fiscal decentralization has four

major components:

i. Allocation of expenditure responsibilities by central and local governments;

ii. Assignment of taxes by government tiers;

iii. The design of an intergovernmental grant system; and

iv. The budgeting and monitoring of fiscal flows between different governments

tiers (Ahmed et al 2005: 6).

It should be noted that lack of meaningful political and administrative decentralization

often renders fiscal decentralization ineffective and hence complicates the analysis

(Guimaraes 1997). Instead of genuine political decentralization, central governments

in many countries appoint officials of sub-national governments, replacing

administrative decentralization with administrative deconcentration (where decision

making is shifted to regional or local officials of the central government) or

administrative delegation (where local governments undertake activities on behalf of

central government).The inability of central government to meet increasing demand

for local services underpins moves towards decentralization in developing countries.

Decentralization of fiscal responsibilities is envisaged to increase efficiency in service

delivery and reduce information and transaction costs associated with the provision of

public services (De Mello 2000b).

2.5 Arguments for fiscal decentralization

Accordingly, De Mello (2000b: 365) summarizes the arguments for fiscal

decentralization as follows:



13

i. Fiscal decentralization enables sub-national governments to take account of

local differences in culture, environment, endowment of natural resources,

and economic and social institutions.

ii. Information on local preferences and needs can be extracted more cheaply

and accurately by local governments, which are closer to the people hence

more identified with local causes.

iii. Bringing expenditure assignments closer to revenue sources can enhance

accountability and transparency in government actions.

iv.

Fiscal decentralization can help promote streamlining public sector activities

and the development of local democratic traditions.

v. By promoting allocation efficiency, fiscal decentralization can influence

macro-economic governance, promote local growth and poverty alleviation

directly as well as through spillovers.

Smoke (2001) also identifies three main reasons for the relevance of fiscal

decentralization in developing countries. These are:

i. The failure of economic planning by central governments in promoting

adequate development.

ii. Changing international economic conditions and structural adjustment

programmes designed to improve public sector performance which have

created serious fiscal difficulties for developing countries.

iii. Encouragement of the development of financial autonomy in developing

countries by changing of political climates. Thus, fiscal decentralization can

be considered relevant for effective governance, macroeconomic stability and

growth.



14

2.6 Extent of decentralization of fiscal powers

A particularly significant means of restricting local government autonomy is through

central government control of the purse strings. To what degree is local government

fiscally independent? To what extent is local government financing commensurate

with its responsibilities? How dependent are district authorities on central government

for their financing? How adequate are their own revenue raising powers?

District authorities have three sources of revenue: the District Assemblies’ Common

Fund, ceded revenue, and their own revenue-raising powers through local taxation.

The DACF is the main source, providing a constitutionally guaranteed minimum

share of government revenue, and thus some financial independence. Yet evidence of

its workings is somewhat mixed. On the one hand, annual monies distributed by the

DACF have increased quite significantly from 38.5 billion cedis in 1994 to 165 billion

cedis in 1999 in actual amounts, that is without taking inflation into account

(Nkrumah 2000: 63). On the other hand, it is disputed whether district authorities

have received the full five per cent, with annual allocations based on projections of

annual revenue, and invariably underestimated. A report for USAID states that DACF

disbursements have averaged about 4.3 per cent of actual annual revenue, though no

source is cited (USAID 2003: 15).A further argument is that the five per cent

minimum of national revenue is insufficient, given the broad range of responsibilities

devolved to district authorities. A second source of finance is ‘ceded revenue’. This is

revenue from a number of lesser tax fields that central government has ceded to the

DAs. Ceded revenue is still collected by the Ghanaian Internal Revenue Service

(IRS), but then transferred to DAs via the Ministry of Local Government and Rural

Development. Again, there is mixed evidence of its workings. Nkrumah (2000: 62)

suggests that ceded revenue has contributed quite substantial sums to local



15

governments, yet Ayee (2000: 32) cites evidence from his three case-study districts

that none had actually received such disbursements from central government. Local

authorities are not completely dependent on central government and do themselves

have some revenue-raising powers. Such local taxation is limited, however, with

Nkrumah (2000: 61) commenting that the “lucrative tax fields” (for example, income

tax, sales tax, import and export duties) all belong to the center, while local

government has access only to “low yielding taxes such as basic rates and market

tolls”.

Given the extensive responsibilities decentralized to district authorities, outlined

above, it is generally recognized that their financial position is weak. Local

government has little fiscal independence, remaining overwhelmingly dependent on

central government for its financial resources, with limited revenue raising ability.

Oyugi (2000: 12-3) suggests that the dependence of local authorities on central

government funding leads to a loss of ‘operational autonomy’, with local initiatives

undermined. The establishment of the DACF is certainly an advance in this respect,

providing a constitutionally guaranteed minimum, though the figure of five per cent

would seem inadequate. Yet we are also reminded that central government directives

determine 75 per cent of expenditure. Greater autonomy still would stem from the

ceding of greater revenue-raising powers, but the likelihood of such fiscal reforms is

slim. Overall, it appears that central government has been more willing to share its

responsibilities with local government than to share its revenue. The consequence of a

fiscal crisis for local government, perhaps generated by central government, would be

an inability to deliver public services in line with new responsibilities, in turn

undermining the DA’s legitimacy in the eyes of the local electorate. Any notion of

popular control is undermined by the truism that ‘he who pays the piper, call the



16

tune’, with DAs responding less to local taxpayers and more to the requirements of

central government.

Despite the constitutional provisions that implied an autonomous and lead role for

local government in initiating and coordinating local development policies (Article

240[2][b]), the evidence of the degree of central government control and the lack of

local government autonomy undermines any notion of ‘domains of discretionary

power’. It is further weakened by the discussion of powers and functions, noting the

extensive range of 86 functions decentralized to local government, yet the non-

existent or limited discretionary power in the majority of those areas. Full power and

responsibility only resides with district authorities for the minority of devolved public

services, estimated at 25 per cent of DACF expenditure. Where public services are

deconcentrated or delegated, DAs merely act as agencies for the central state or have

tasks delegated to them by central government ministries, with little or no

discretionary powers. There is little to suggest that DAs have become the principle

authority, providing direction and supervision to all other authorities in the district,

including central government departments and agencies, as outlined in constitutional

and legislative provisions. On the contrary, central government appears to remain

dominant at district level, in terms of top-down policy direction and guidance from

the Ministry of Local Government and Rural Development, the National

Development Planning Commission and the Ministry of Finance, and in terms of

policy implementation by central government agencies.

2.7 Effectiveness of fiscal decentralization

Significant progress has been made towards achieving fiscal and macro-economic

stabilization since the transition in most countries – progress which has importantly

changed the environment in which the decentralization process is taking place. There



17

has, however, been substantial variation in the nature and pace of reforms across

countries. In general, the Eastern European and Baltic countries, the most advanced

reformers, have made rapid progress. The intermediate reformers – the South-Eastern

European countries of Albania, Bulgaria, and the slow reformers – Armenia,

Azerbaijan, Belarus, Georgia, Tajikistan, Turkmenistan, Uzbekistan have been less

successful in establishing fiscal institutions, controlling fiscal imbalances, and

redefining the role of the state ( EBRD, 1998; Valdivieso, 1998).

2.8 Challenges of fiscal decentralization in developing countries

It has to be acknowledged that some modest gains have been achieved since the

process of fiscal decentralization was set in motion in Ghana. According to Kunfaa

(2002), despite the many negative stories about misappropriation of funds in

MMDAs, a significant number of development projects have been carried out on the

initiative of almost every MMDA throughout the country, which would not have been

the case if development was initiated from only the central government. A number of

bottlenecks towards fully institutionalizing fiscal decentralization in Ghana however

still remain. These include the following:

• Substantial authority has been given to MMDAs without accompanying

resources to fulfill the mandates;

•

Composite budget system has not been fully operationalized;

• MDAs continue to prepare budget estimates and account for expenditure on

sectoral basis at the district and regional levels;

• Limited discretionary authority of MMDAs over funds from DACF;

• Weak local revenue generation and mobilization capacity of MMDAs

• Untimely disbursement of funds from DACF; and



18

• Substantial deduction in the quarterly DACF allocation to the MMDAs to

finance national level programme, for example National Youth Employment

Programme, Fumigation among others.

• Variances in the amounts allocated, disbursed and actually received by

MMDAs from the DACF. The variations were as a result of the fact that

certain expenditures were incurred on behalf of MMDAs and the cost

deducted at source.

According to De Mello (2000b), some of the challenges of fiscal decentralization

include the following:

2.8.1 Intergovernmental transfers

The failure to adequately address the question of how to manage intergovernmental

fiscal relations in order to meet the growing needs for public services at the local level

while preserving fiscal discipline nationally and sub-nationally. This requires

institutional clarity and transparency to avoid coordination failures that lead to

inefficient spending by local governments manifested in deficit bias and higher

borrowing costs that can aggravate macro-economic imbalances and instability. To

avoid such undesirable outcomes, there is a need for incentives and capacity building

on top of institutional checks and balances to ensure prudence in sub-national fiscal

management.

2.8.2 Expenditure management and financing

Assignment of expenditure and financing responsibilities to sub-national

governments can adversely affect service delivery in different ways. For example

decentralization of water and sanitation services to small local governments in Latin

America have led to a loss of economies of scale in service delivery. Many



19

governments in Latin America and Africa keep the financing of health and education

at national level because the spillover effects from health and education outcomes and

their impact on equity are national. Assignment of certain business taxes to local

levels in the United States have led to inefficient tax competition, constraining the

ability of municipalities to generate revenue and deliver services.

2.8.3 Adequacy of local revenues and autonomy

The lack of clearly defined, stable and uniform revenue assignments between the

center and sub-national governments inherent in this approach has weakened

budgetary management at the sub-national level and created perverse incentives for

sub-national governments to either hide locally mobilized revenue sources in extra-

budgetary funds or to simply reduce their efforts to mobilize revenues locally.

Punitive “extractions” by higher level governments in the form of clawing back any

additional revenues raised by lower level governments through reduced sharing rates

have also created perverse incentives for revenue mobilization, at the local levels in

many countries. This led to surplus funds being trapped in the treasury system and

captured by the central government by the end of the year. The resultant non-

uniformity in revenue sharing and the absence of stability undermined sound fiscal

management at the local level (Banks and Pigey 1988).

Some of the provisions in the Local Government Service Act, 2003 also pose some

challenges for MMDAs which include the following:

2.8.4 Local government borrowing

Subject to article 181 of the Constitution and to subsection (2), a District Assembly

may raise loans or obtain overdrafts within the Republic of the amounts, from the

sources, in the manner, for the purposes and on the conditions approved by the



20

Minister in consultation with the Minister responsible for Finance. An approval is not

required where the loan or overdraft does not exceed twenty million cedis and the

loan or overdraft does not require a guarantee by the Government. This poses a

challenge to local government (local government Services act, 2003 Act 656).

2.8.5 Budget discretion

Subject to section 3(a) (ii) of the Local Government Act, 2003, MMDAs are to

prepare the budget of the district related to the approved plans to the Minister

responsible for Finance for approval. Most often, not all the estimates in the budget

are usually approved by the Minister of Finance and this constitutes a challenge for

MMDAs. The ability of central authorities to pursue fiscal consolidation at the

expense of sub-national budgets by unilaterally transferring financial obligations for

politically sensitive social protection programmes, without providing a compensatory

increase in sub-national revenues demonstrates that in many countries expenditure

assignments continue to lack integrity, clarity and stability. The infringement on sub-

national budget autonomy is further extended by the fact that while transferring the

financial responsibility, central authorities retain control over key cost parameters

such as allowable rental charges for housing, administered prices for utilities,

minimum wages and benefit rates. Typically, the transfer of social protection

spending to local governments is an unfunded mandate. The persistence of such

unfunded mandates constrains sub-national budgetary autonomy and undermines

fiscal accountability by preventing a clear distinction between central and sub-

national responsibilities.

The adverse effects of decentralization on service delivery arise due to a number of

common factors. These factors include: first, lack of capacity at sub-national



21

government level, which restricts local service delivery, because local authorities lack

the ability to manage public finances and keep proper accounting procedures, second,

misalignment of responsibilities owing to incomplete decentralization or political

factors, for example, while local authorities may be responsible for education, higher

levels of government pay teachers, third, political capture by local elites when civic

participation in local government is low, finally, other problems including a soft

budget constraint that leads to over borrowing by sub-national governments. To

overcome these challenges, optimal assignment of expenditure and tax responsibilities

should be based on such criteria as economies of scale, spillover benefits, and cost of

administering taxes, tax efficiency, and equity. In practice, however, fiscal

decentralization often depends on political realities expediencies and historical

legacies (Ahmed et al 2005).

Recent studies suggest that the design and implementation of a multi-tier system of

government can significantly affect overall resource allocation in the economy and,

hence, economic efficiency, growth, and welfare (Davoodi and Zou, 1998; Martinez-

Vazquez and McNab, 2003; Akai and Sakata, 2002). A central argument for fiscal

decentralization leading to improved resource allocation rests on the assumption that

fiscal decentralization increases local influence over the public sector. However, in

theory, there is an equal possibility that fiscal decentralization simply transfers power

from national to local elites and that improved access of local elites to public

resources increases opportunities for corruption (Bardhan and Mookherjee, 2000).In

light of the possible effects – that depend on the institutional design – of fiscal

decentralization on economic growth, macro-economic management and corruption, a

key challenge for many transition economies has been to reap the economic benefits

of decentralization while maintaining control over public expenditures and borrowing,



22

restoring growth and improving accountability of local governments and officials to

limit corruption.

2.9 Prospects of Fiscal Decentralization

To address the related challenges with fiscal decentralization in Ghana, a number of

initiatives are being implemented. An inter-governmental fiscal framework that

clearly assigns service responsibilities between the central government and the sub-

national level has been developed and is being implemented. A Municipal Finance

Bill to assist local governments to source funds from the open capital market is being

considered by Parliament. In a bid to further strengthen the fiscal capacity of

MMDAs, the Ghana government and Development Partners (DPs) have introduced

the District Development Facility (DDF). This facility exists to provide additional

financial resources to MMDAs through an annual performance assessment to enable

them implement programmes and projects in their Medium-Term Development Plans

(MTDPs). The Ministry of Local Government and Rural Development also intends to

introduce the concept and practice of “municipal contracts” whereby Metropolitan

and Municipal Assemblies would be assessed at the technical/urban, financial and

organizational levels with a view to granting them additional financial assistance to

implement projects identified in a Priority Investment Programme prepared after the

assessment (Kunfaa, 2002).

In ensuring effective implementation of a good fiscal decentralization programme,

Smoke (2001) identifies five critical elements. These elements are:

• An adequate enabling environment;

• Assignment of an appropriate set of functions to local governments;



23

• Assignment of an appropriate set of local own-source revenues to local

governments;

• The establishment of an adequate intergovernmental fiscal transfer system;

and

• The establishment of adequate access of local governments to development

capital.

According to Jorge (2011) different countries are at different levels of development

and refinement of their decentralized fiscal frameworks. Furthermore, the following

measures can be put in place in order to address the challenges of fiscal

decentralization in developing countries:

2.9.1 An Agenda for Reforming Expenditure Assignment and Management

A clear assignment of expenditure responsibilities should be at the top of national

reform agenda for local government finance. The following topics must be addressed:

i. Exclusive responsibilities must be identified.

ii. For concurrent competencies, specific responsibilities for various aspects—

regulation, financing, and implementation—must be assigned.

iii. Higher level controls on local expenditures must be appropriately limited.

iv. With limited administrative capacity, asymmetric assignments between central

and local governments should be considered.

v. Methods to translate responsibilities into expenditure needs and financing

requirements should be developed.

vi. Unfunded mandates must be avoided.

vii. Funding and staffing of deconcentrated offices of line ministries should be

downscaled or eliminated if services are devolved.



24

viii. Implementation of expenditure decentralization needs to be strategic (capacity

building and technical assistance).

2.9.2 An Agenda for Improving Local Revenue Generation and Autonomy

The overarching goal should be to increase reliance on own revenues with meaningful

discretion.

In addition:

i. Reforming and modernizing property tax administration must be a priority;

and

ii. Diversifying sub-national tax bases:

a) Avoiding nuisance taxes and economic distortions;

b) Creating a shortlist of other good local taxes: vehicle taxes, business

license taxes, and betterment levies on real estate;

c) Implementing business taxes which offer opportunities (using sales

turnover as a proxy, but avoiding conflict with national value-added

taxes);

d) Furthering local tax autonomy through introduction of a local

“piggyback” personal income tax with a flat rate and possibly

payroll taxes; and

e)

Implementing “green” taxes related to waste management, water and

air-polluting activities, and the production of energy.

2.9.3 An Agenda for Reforming Intergovernmental Transfers

Reforming intergovernmental transfers has several requirements. Among them are the

following:

i.

Assuring predictable, regular, and transparent transfer mechanisms;



25

ii. Securing an appropriate balance among the various types of transfers (using

separate instruments for separate goals);

iii. Expanding and improving the use of equalization transfers based on a formula

using measures of expenditure needs and fiscal capacity and introducing an

explicit rule for the pool of funds to be distributed determining the source in

origin (fraternal—or contributions by richer jurisdictions versus vertical—or

contributions by the central government, and in the latter case, also

determining the amount as a percentage of central government revenues);

iv.

Reviewing and improving mechanisms for allocating resources under

conditional grants (rule based as opposed to discretionary);

v. Consolidating specific grants where large numbers of poorly coordinated

programmes exist into fewer “block” grants—providing larger but still

conditional discretion to sub-national governments;

vi. Implementing performance-based grants for encouraging budget process

reforms and improvements in service delivery; and

vii. Rationalizing capital grants (what is being pursued) and coordinating with

borrowing policies.

2.9.4 Local Government Borrowing and Investment Finance

To varying degrees, many countries in Asia and Africa, such as Indonesia,

Philippines, Ghana, and Nigeria allow for local government borrowing within a

regulated framework. Prudent, fiscally responsible local government borrowing needs

to be promoted in many countries in these regions. Legal and regulatory frameworks

for local government borrowing need to be strengthened. Options and support

mechanisms for local government borrowing must be expanded, including support,

where appropriate, to intermediate financial institutions or municipal development



26

funds (such as in the Philippines). Given the needs for public infrastructure, other

financing mechanisms should have wider adoption [tax increment financing,

betterment levies (valorization), and public–private partnerships].

2.9.5 Better Framing of Institutional Reform

The reforms above should be reinforced by other measures of an institutional nature:

i. Strengthen regular and systematic dialogue between sub-national

governments and the central government on intergovernmental financial

policy.

ii. Where deconcentrated units coexist with decentralized governments, identify

the right roles for and interactions between deconcentrated and devolved

government entities.

iii. Rethink the role of parallel institutions (social funds, etc.) to sub-national

units and try to limit them and incorporate them into the main sub-national

government stream.

2.10 History of decentralization in Ghana

Since independence, succeeding governments in Ghana have regarded

decentralization as a necessary condition not only for socio-economic development,

but also to achieve political objectives such as legitimacy and (paradoxically)

recentralization of power (Ayee 1994; 2004; 2008a). These political objectives

explain in part why the progress of decentralization has been slow and has often

resulted in recentralization, despite over 10 commissions and committees of enquiry

established to look at decentralization reforms. For instance, the post-colonial

government of the Convention People’s Party (CPP) under Kwame Nkrumah (1957–

1966) fearing that decentralization would promote divisive tendencies, encouraged



27

centralization of power in the nation’s capital, particularly the Office of the President.

The government also at times has fragmented the decentralized units as a way of

weakening them (Ayee 1994). In addition to these, charges of corruption and

ineptitude particularly in the CPP era have tainted their effectiveness. The local

government service was also hampered by the insecurity local government workers

felt in relation to their conditions of service, pay equity, and general well-being; a

unified civil service was considered desirable to enhance local administration. These

weaknesses, as well as other shortcomings (such as the dual hierarchy structure in

which the central and local government institutions operated, a lack of political and

bureaucratic commitment to decentralization, and inadequate financial and human

resources) continued up to the passage of local government reforms in 1988 (Ayee

2004a, b).

Under the Provisional National Defense Council (PNDC) from 1981 up to the

elections of 1992, Ghana undertook a range of efforts to extend governance at the

local level, and some of these were later incorporated into the present-day system.

This included the creation of local cells initially called “Committees for the Defense

of the Revolution,” along with Unit Committees. In 1988, the PNDC established the

District Assembly system with the passage of Law 207. The 1992 Constitution, along

with subsequent statutes and enabling legislation, superseded the pre-existing local

governance system and reorganized it to constitute a new framework. This

Constitution was the origin of the current arrangement, and was elaborated upon in

1993 with the Local Government Act, and with subsequent legislation. Ghana’s

decentralization sequence moved from administrative decentralization (beginning in

the 1980s) to political decentralization (with elections in 1988 and the Constitution of

1992) and then to fiscal decentralization (after 1994).



28

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter explains the methodology employed by the researcher to carry out the

research work. The chapter also outlines how the researcher gathered information

from a wide range of approaches and analytical techniques which were used as the

basis for interpretations, explanations, inferences and predictions. It also highlights

the population of the study, the sample size, and the sampling technique, sources of

data, method of data collection as well as data analysis.

3.2 Research methods

This research adopts both qualitative and quantitative approaches. Qualitative

approach often categorizes data into patterns as the primary basis for organizing and

reporting results. The qualitative approach typically would use the following methods

for gathering information: observation, interview, open-ended questions and analysis

of documents and materials in order to gather non-numerical data. The quantitative

approach on the other hand would use highly structured methods such as close-ended

questions in gathering numerical data.

3.3 Data sources

The sources from which data was gathered for this research has been grouped into

two, namely primary and secondary data sources.

3.3.1 Primary sources of data

The primary sources from which data was collected were, administering of

questionnaires to the officials of the Municipality comprising the municipal finance

officer, the accountant, municipal planner, budget officer, the municipal chief



29

executive, the municipal coordinating director, who are better placed to provide first-

hand information on fiscal decentralization of the municipal assembly. Some

questionnaires were also administered to the revenue collectors and ordinary citizens

of the eight towns in the Wa municipality including ,Wa township, Busa, Charia, Boli,

Kpongu, Kperisi/Mengwe, Goripie, Kolkpong, to obtain first-hand information from

them to compare with that of those in the offices.

3.3.2 Secondary sources of data

The secondary sources from which data was collected were; rates fixing resolutions,

annual budgets and management reports on the comparison of budgets against actual,

Municipal Chief Executive (MCE) session reports, journal reports, newspaper

articles, the World Wide Web (internet),and books among others.

3.4 Sample Population and Sample Size

The population of this research covered all the eight towns within the Wa

Municipality. However, because of the dispersed nature of the geographical area and

large size of the population of 221,905 (2000 population and Housing census), there

search could not cover the entire population and hence a sample population was

drawn. The sample population for this research was made up of the entire population

out of which 150 was selected as the sample size.

3.5 Sampling techniques

Due to the dispersed nature of the population and the diversity of stakeholders in the

municipality, quota sampling which is a non-probability sampling technique was used

to assign quotas to the various sub-groups where the data was collected from in order

to ensure that views of the different stakeholders were captured and data collected is a

representation of the entire municipality. For the officials of the municipality,



30

purposive sampling which is a non-probability sampling technique was used to select

respondents who fell within the quota. For the revenue collectors of the eight towns,

respondents who fell within the quota were selected using convenience sampling,

which is a non-probability sampling technique. For the general public, a non-

probability sampling technique known as convenience sampling was used to select the

respondents who fell within the quota.

In line with the research objectives and the nature of fiscal decentralization in the

municipality, a quota of fourteen (18) people was given to the officials of the

municipal assembly, twenty-four (20) people to revenue collectors of the eight towns

with two or three people assigned to each town and one hundred and twelve (112)

people to the ordinary citizen who were further divided into fourteen (14) people each

to the eight towns.

3.6 Data Collection Instruments

The use of questionnaires and interview guides were the main data collection

instruments for the research.

3.6.1 Interview

For the purposes of this research, a semi-structured interview was employed. With

this, a set of questions based on the objectives of the study were prepared but other

questions were also asked emanating from responses given by the respondents. Group

interviews as well as face to face interviews were conducted for the ordinary citizens

in the eight towns. This form of data collection was used as a result of the following

reasons.

1. It afforded the researchers the opportunity to escape any issue of restriction

created by strictly going by predesigned questions.



31

2. It gave the opportunity for the researchers to ask follow up questions to answers

given by respondents. Misunderstandings were cleared up immediately during the

interview.

3. The researchers were also able to reword and reorder the questions as and when it

became necessary.

3.6.2 Questionnaires

Both closed and open ended questionnaires were used in the data collection exercise.

The closed ended questions were followed with options from which respondents

could choose. Some of the questions were closed because of the inhabitants’ level of

understanding of issues concerning fiscal decentralization in the municipality. For

respondents who could not understand the English Language, the questions were

explained to them in their local dialect by the researchers. The questionnaires totaling

one hundred and fifty (150) were interviewer-administered and respondents who had

difficulties in answering were assisted to answer the questions and all answered

questionnaires were submitted on the spot. This was done because it was envisaged

that many would not return the questionnaires when allowed to take them home to

answer and also due to the scattered nature of the towns in the municipality. In all,

three sets of questionnaires were designed, one for officials of the Municipality, one

for the revenue collectors of the eight towns and one for the ordinary citizens.

3.7 Data Analysis Tools

The primary data was analyzed with the help of the Statistical Package for Social

Sciences (SPSS) software. While SPSS was used to generate the data frequency tables

and their corresponding graphs Excel was used to refine the charts with regards the

picture effects. Tables as well as pictorial presentation were used to interpret the



32

results of the data gathered. Bar charts and pie charts were used in the pictorial

analysis. The secondary data was as well organized in tabular and graphical forms

where applicable. The data was analyzed around the main objectives of the study to

determine the relationships of the variables under study. The results were interpreted

and recommendations suggested appropriately. The study was concluded by the

summary of the whole research work through to the recommendations offered.

3.8 Profile of the Wa Municipal Assembly

The Wa Municipal assembly is one of the ten districts in the upper west region of

Ghana. It was established by the Local Government (Wa Municipal) (Establishment)

Instrument, 2004 (L. I. 1800), after the revocation of the Local Government (Wa

District Assembly) (Establishment) Instrument, 1988 (L.I. 1433). The Northern

Province comprised of three native authorities: the Wa, Lawra and the Tumu native

authorities representing the Waala, Dagaaba and Sissala ethnic groups. Wa has been

inhabited for several hundred years, first by Lobis and Dagaabas, and then by Islamic

scholars and traders who settled there in order to participate in the trans-Saharan

trade. These newcomers adopted the Dagaare language and to some extent simplified

its grammar, as well as incorporating numerous loan words from Hausa, such as lafia

(satisfactory) and alabasa (onion). The name of the town means 'come' in the Waali

language.

The Wa Municipality shares borders with the Wa West District to the West, Wa East

District to the East and South, and Nadowli District to the North. It lies within latitude

1040

, N to 2

045 ‘N and longitude 9

032, to 10

020,W. It covers a total Land area of

5859sq.km, which is about 31.7% of the total Land area of the Upper West Region.

The implication of the location of the municipality for development is enhancing



33

bilateral trade and commerce with Franco phone countries. Wa town has the potential

to grow and be upgraded into both an industrial and commercial hub for the north-

western corridor of Ghana. According to the 2000 population and Housing census, the

Wa Municipality has a total population of 221,905. The growth rate of the

municipality is 2.7% for rural and 4% for the urban. The population density is

approximately 38 persons per square kilometers. There is growing population density

and consequently pressure on land and socio-economic infrastructure. This raises the

issue of population management, specifically, housing, streetism, conflict

management, land use planning to be addressed. The population structure of the Wa

municipality revealed a preponderance of the youth over the aged and females over

males. The youth form 49%, potential working population 47% and the aged 4%. This

means a high dependency ratio since the economically active population is 47%

compared to dependent population of 53%. The population is also a female dominated

one. That is 51% females against 49% males. Wa is in the southern part of the Sahel,

the semi-arid area south of the Sahara that ranges from Senegal to the Sudan. Average

annual rainfall is around 1000mm, almost all of which occurs between May and

October. Following the May-October rainy season is a cool dry period called the

Harmattan (in Waali sesiaos anga) when a steady, often dusty, north wind blows from

the Sahara. The hottest period of the year is in February and March when daytime

temperatures often reach 110 F (42o

C).

Despite its urban status, Wa is in many ways still an agricultural community, and

many people make a good portion of their living in small scale farming. The main

crops are corn, millet, yams, okra and groundnuts. Upland rice is also farmed in a few

areas. The major fruit crop is the mango. Shea nuts are collected from wild trees, for

food or refinement into oils and cosmetics. The staple food of Wa is known as T-Z in



34

English. This is an abbreviation for the Hausa expression Tuo-zaafi, meaning 'very

hot'. In Waali, this food is referred to as sao. It is a thick porridge of corn flour eaten

like fufu - by tearing off a chunk and dipping into a soup, usually of okra. The rains

are however erratic, resulting in low crop yield. The service sector of the

municipality’s economy relates to a number of activities such as integrated marketing

system, tourism, hospitality industry as well as restaurants commonly called chop

bars. Scattered over the municipality are smaller/informal markets where foodstuffs

and other manufactured goods are sold. The industrial sector constitutes the least in

terms of employment. This sector is characterized by small scale manufacturing;

which is featured by easy entry, reliance on indigenous resources, family ownership

and the use of labour intensive technology. These include cottage industries such as

Shea butter and other oil and fat extractive industries, brewing of local drinks (pito),

black-smithing, metal works, weaving among others. These activities collectively

employ a small proportion of the economically active population of the municipality.

All the eight towns in the municipality have markets. Wa which is the largest of the

eight towns hosts the administrative headquarters of the municipality.

The municipality has eight towns namely, Wa township, Busa, Charia, Boli, Kpongu,

Kperisi/Mengwe, Goripie, Kolkpong. The internally generated funds of the

municipality come from the above mentioned economic activities and market tolls

from the eight major markets. These are collected by towns and reported on quarterly

basis to the assembly. Each town has a chairman, secretary and treasurer with

collectors that collect these funds. The town executives facilitate the work of these

collectors and involve personally in the collection where necessary. The municipality,

being one of the less developed municipalities in Ghana, needs substantial funds for



35

development in order to catch up with others. However, this cannot be done if the

municipality should rely entirely on the district assembly common fund.



36

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 INTRODUCTION

This chapter concentrates on the presentation and analysis of primary and secondary

data gathered purposely for this research and analyzed in line with our research

objectives. Both graphs and tables are used to present relationships between variables.

4.2 THE EXTENT OF DECENTRALIZATION OF FISCAL POWERS

This section examines the assembly’s power to borrow, power to generate and use its

own revenue, power to prepare and approve its budgets and its discretionary power

over the use of DACF.

4.2.1 Power to borrow

Source: Field survey February, 2012

To find out whether the assembly has the power to borrow funds and whether there

are any restrictions attached, questionnaires were administered to eighteen (18)

members of staff at the assembly. Out of the eighteen respondents, sixteen (16)

members representing 88.9% indicated that the assembly has the power to borrow, but

this power is restricted to a ceiling of two thousand Ghana cedis (GH¢2000). Two (2)

Table 4.2.1 The assembly’s power to borrow and its restrictions

Valid

Frequency Percent

Valid

Percent

Cumulative

Percent

Yes, but restricted to GH¢ 2,000

No

Total

16 88.9 88.9 88.9

2 11.1 11.1 100.0

18 100.0 100.0



37

members of staff representing 11.1% however indicated that the assembly does not

have the power to borrow funds. From the responses given in table 4.2.1 above, the

assembly has the power to borrow but this power is restricted to a ceiling of

GH¢2000, hence any borrowing beyond this ceiling must be permitted by the sector

minister. However, the variation in response given by the other two members of the

sample could be as a result of lack of information with regards the assembly’s power

to borrow, since this ceiling has been clearly stated in the Local Government Services

Act of 2003, Act 656.

4.2.2 Power to generate and use revenue

Figure 4.2.1 Apart from borrowing, does the assembly have power to generate

and use its own revenue?


In order to find out about the assembly’s power to generate and use its own revenue,

questionnaires were administered to a sample of eighteen members of staff of the

assembly. All the eighteen members representing 100% as shown in figure 4.2.1

above indicated that the assembly has absolute power to generate retain and use its

18

0%

10%

20%

30%

40%

50%

60%

70%

80%90%

100%

Frequency

Yes

Yes



38

own revenue. This means that in terms of the power to generate, retain and use

revenue, the assembly has been given complete power to do so without any

restrictions.

4.2.3 Power to prepare and approve budgets

Table 4.2.2 Assembly’s power to prepare and approve its budgets

Valid Frequency percent Valid

percent

Cumulative

frequency

Power to prepare and its

approve budget

18 100.00 100.00 100.00


The table above shows the responses given by a sample of 18 respondents regarding

the assembly’s power to prepare and approve its budgets. All the 18 respondents

representing 100% of the sample indicated that the assembly has been given complete

power to prepare and approve its budgets. This implies that in terms of the

preparation, approval and implementation of budgets, the assembly does not need any

approval from central government. Even though the assembly has been given absolute

power to prepare and approve its own budgets, they should ensure that amounts stated

in the budgets are realistic and reliable in order to increase the possibility of them

achieving their budgets estimates.

4.2.4 Restrictions on the use of the DACF

Figure 4.2.2 below shows information concerning restrictions placed on the assembly

with regards the use the DACF. Out of the total 18 respondents, 4 people

representing 22.22% of the sample indicated that mandatory deductions by the central

government restricts the assembly from having access to the full amount allocated to



39

it. Also, 5 people representing 27.78% of the sample indicated that government

policies/directives restrict the assembly’s power to use its share of the DACF at its

own discretions. This implies that it is the central government that directs the

assembly as to how it is to use its share of the DACF. Furthermore, 2 people

constituting 11.11% of the sample indicated that the restrictions placed on the

assembly’s use of the DACF are both the mandatory deductions and government

policies/directives. In addition, 3 respondents forming 16.67% mentioned expenditure

meeting budget estimates as one of the restrictions the assembly faces with regards

the use of the DACF. Four people representing 22.22% also said the DACF cannot be

used for administrative expenses as it is solely for developmental projects. This

information provided clearly indicates that the assembly does not have absolute power

over the use of the DACF.

Figure 4.2.2 Restriction placed on the use of the DACF


22%

28%

11%

17%

22%

Mandatory deductions

Government

o!icies"directives

#ot$ and #

&'enditure must meet(ud)et estimates

*annot (e used +or

admin,e'enses is so!e!y +or

deve!omenta! ro-ects



40

4.3 EFFECTIVENESS OF FISCAL DECENTRALIZATION

This section covers the revenue performance of the assembly, the assembly’s ability

to meet its budget plans and the level of education of the revenue collectors.

4.3.1 Revenue performance

Table 4.3.1 Budgeted and actual revenue for 2009 and 2010

REVENUE BUDGET ACTUAL

VARIVARIAN

CE BUDGET ACTUAL VARIANCE

HEAD ESTIMATE REVENUE STIMATE REVENUE

2010 (GH¢)2009 (GH¢) 2009 (GH¢) 2009 (GH¢) 2010 (GH¢) 2010 (GH¢)

Rates 20,300.16 48,812.11 28511.95F 50,300.00 58,658.47 8358.47F

Lands 25,800.12 14,998.00 10802.12A 25,800.00 13,638.10 12161.90A

Fees & Fines 100,238.28 80,411.20 19827.08A 95,558.00 96,452.80 894.80F

License 29,521.56 25,490.80 4030.76A 30,580.00 6,080.50 24499.50A

Rent 23,632.08 20,843.00 2789.08A 24,112.00 19,816.64 4295.36A

Grants 4,883,041.44 2,015,552.90 2867488.54A 19,283,231.00 3,337,693.31 15945537.69A

Investment 8,920.08 14,323.49 5403.41F 41,680.00 17,691.51 21988.49A

Miscellaneous 4,000.08 5,200.38 1200.30F 4,000.00 18,124.54 4124.54F

TOTAL 5,095,453.80 2,225,631.88 2869821.92A 19,555,261.00 3,568,155.87 15858105.13A

Source: Wa municipal assembly

From table 4.3.1 above, ‘A’ represents adverse balance and ‘F’ represents favorable

balance.

The table above represents the budget estimates, actual revenues and variances of Wa

municipal assembly for 2009 and 2010. Out of the total amount of GH¢5,095,453.80

budgeted for 2009 only GH¢2,225,631.88 was generated by the assembly resulting in



41

an adverse variance of GH¢2,869,821.92. This was a result of the assembly’s failure

to meet its revenue target through rent, lands, license, fees and fines and grants. In

2010, an amount of GH¢3,568,155.87 was generated out of a budgeted amount of

GH¢19,555,261.00 which resulted in an adverse variance of GH¢ 15,858,105.13. This

was as a result of the assembly’s inability to meet its revenue target in terms of lands,

license, rent, grants and investment. In each of these years, the assembly was unable

to achieve even 50% of its budgeted revenue which implies that the assembly is not

being effective or living up to expectation in terms of its revenue performance. This

situation could be attributed to factors such as; ineffective and inexperienced budget

officers who cannot make attainable budget estimates, the assembly not making good

use of all its sources of finance, especially in the area of property tax where the

assembly does not have valuers to value its numerous properties to enable it tap

revenue from property tax as evidenced through an interview with the budget officer,

ineffective revenue mobilization team and leakages in the revenue system. The

implications of these adverse variances could be serious as the assembly may not be

able to carry out most of its planned projects and also lead to default in repayment of

loans taken.

4.3.2 Ability to meet budget plans

Figure 4.3.1 does the assembly always meet its budget plans?


0

24

68

10

1214

16

(!e to meet (ot$ revenue and

e'enditure !ans

.na(!e to meet (ot$ revenue and

e'enditure !ans

F r e q u e n c y



42

From the bar chart above ( figure 4.3.1), four respondents constituting 22.2%

indicated that in terms of meeting budget plans, the assembly is able to meet both

revenue and expenditure plans. It is also realized that fourteen people representing

77.8% said that the assembly is unable to meet both revenue and expenditure plans.

The assembly’s ability to meet both revenue and expenditure plans as indicated by the

four respondents is welcome news for the assembly. However, majority of the

respondents (77.8% of the sample) indicated that the assembly is not able to meet

both its revenue and expenditure plans. This is a serious situation and needs to be

looked into. It may be as a result of the assembly making unrealistic budget estimates

or revenue collectors’ inability to generate enough revenue to meet budget plans. The

revenue collectors’ inability to generate enough revenue may be due to their low level

of education as shown in table 4.3.2 below. In table 4.3.2 below, majority of the

revenue collectors (fourteen people representing 70% of the sample) have their formal

education up to the basic school level as against only six people representing 30%

who have their formal education up to the secondary level. Their low level of

education may have an impact on their ability to distinguish taxable activities from

non-taxable activities (understanding of tax issues) and may end up not taxing certain

businesses that are taxable and also as noted from the field survey that some revenue

collectors only go to traders who are willing to pay the taxes without dragging them,

thereby reducing the amount of revenue they are able to generate.



43

4.3.3 Revenue collectors education level

Table 4.3.2 Level of education of revenue collectors

alid

Frequency Percent

Valid

Percent

Cumulative

Percent

Basic

Secondary

Total

14 70.0 70.0 70.0

6 30.0 30.0 100.0

20 100.0 100.0

Source: Field survey February, 2012.

4.4 THE CHALLENGES OF FISCAL DECENTRALIZATION

This section examines the challenges the assembly encounters in acquiring loans, the

assembly’s challenges in preparing its budgets, the assembly’s challenges in

mobilizing revenue, the challenges tax payers face in paying taxes as well as the

challenges revenue collectors usually encounter in carrying out their duties of

mobilizing revenues for the assembly.

4.4.1 Challenges in acquiring loans

Figure 4.4.1 challenges the assembly encounters in acquiring loans


50%

6%

11%

33%

Lack of or inadequatecollateral

Unfavourable time of

repayment

High interest rates

Other:limited ceiling of

GHS2000



44

Figure 4.4.1 above illustrates the challenges the assembly encounters in acquiring

loans. Nine respondents representing fifty percent of the sample indicated that the

assembly lacks or does not have adequate collateral security in acquiring loans. This

constitutes the major challenge of the assembly in terms of acquiring loans. The

implication of this is that projects that the assembly intends to finance through loans

will not see the light of day. One respondent representing 6% of the sample indicated

that unfavorable time of repayment of loans poses a challenge to the assembly when it

comes to acquiring loans. Since the assembly is a service rendering organization and

most at times goes in for loans which it usually invests in long term projects of which

the benefits do not flow to the assembly directly, there are instances where these loans

may be due for repayment at a time the assembly does not have money to service

them. High interest rates is yet another challenge the assembly encounters in

acquiring loans as indicated by two respondents constituting 11% of the sample as

shown in figure 4.4.1 above. The interest rates usually charge by financial institutions

are so high that the assembly finds it difficult to generate enough funds to repay the

interest plus the principal as to and when they fall due. Six respondents making up

33% of the sample said that the limited ceiling of GH¢2,000 poses a challenge to the

assembly in the process of acquiring loans as evidenced in the Local Government Act,

1993, (Act 462), that MMDAs are allowed to borrow up to the tune of GH¢2000. The

implication of this is that in order for the assembly to borrow beyond this amount,

permission must be sought from the sector minister which involves some level

bureaucracy and may delay certain projects the assembly wishes to finance through

the loans.



4.4.2 Challenges in p

Figure 4.4.2 challeng

Source: Field survey

Figure 4.4.2 above s

budgets. One respond

budget staff is one of

This may result in del

of budgets being prep

on time, respectively.

challenge the assemb

forming 27.8% of the

budget staff is the dif

ability to use economi

budget estimates that

16.7% of the sample.

that both inadequate

making budget esti

0

1

2

3

4

5

6

7

8

/nadequate

(ud)et sta++

F r e q u e n c y

45

eparing budgets

s the assembly face in preparing its budg

February, 2012

ows the challenges the assembly encount

ent constituting 5.6% of the sample indica

he challenges the assembly encounters in pr

y in budget preparation as well as comprom

ared because of the few staff and their rush

Inadequate skills on the part of some bu

ly faces in preparing its budgets as indica

sample. In line with inadequacy of skills

iculty in making budget estimates, since th

c, mathematical and statistical models appr

are reliable, as evidenced by three respo

Two respondents constituting 11.1% of th

skills on the part of some budget staff an

ates are the challenges the assembly f

/nadequate

si!!s on t$e

art o+ some

(ud)et sta++

i++icu!ty in

main) (ud)et

estimates

#ot$ # and * !!

ts

er in preparing its

ed that inadequate

paring its budgets.

ising on the quality

to prepare budgets

get staff are yet a

ted by five people

n the part of some

is may hinder their

priately in making

dents representing

e sample indicated

d the difficulty in

ace in its budget

ries1 7

$e a(ove



46

preparation. 38.9% representing seven respondents of the sample said that the

assembly’s challenges in preparing its budgets are; inadequate budget staff,

inadequate skills on the part of some budget staff and difficulty in making budget

estimates. All these challenges need to be investigated and addressed to pave way for

effective budgeting exercise.


Table 4.4.1 above depicts the challenges the assembly face toward its revenue

mobilization drive. Two respondents out of eighteen mentioned that the assembly

loses revenue through tax evasion by tax payers. Although this represents a small

percentage of the challenges the assembly faces in revenue mobilization, its impact on

the amount of revenue the assembly can generate within a period cannot be under

estimated. Seven respondents representing 38.9% of the sample pointed to lack of

cooperation from tax payers as a challenge. The survey showed that most tax payers

4.4.3 Challenges in mobilizing revenue

Table 4.4.1 Challenges The Assembly Faces In Mobilizing Revenue

Valid

Frequency Percent Valid Percent

Cumulative

Percent

Tax evasion 2 11.1 11.1 11.1

Lack of cooperation from

taxpayers

7 38.9 38.9 50.0

Pilfering on the part of

revenue collectors

3 16.7 16.7 66.7

All the above 6 33.3 33.3 100.0

Total 18 100.0 100.0



47

are not willing to cooperate with the revenue collectors as they go on their rounds to

collect taxes. This could be as a result of several factors including lack of public

sensitization on the part of the assembly on the need to pay tax, unfavorable time of

tax collection, some of the tax payers feel that the tax system is not fair, and lack of

collaboration between the assembly and the tax payers in the determination of the tax

rates. Pilfering on the part of revenue collectors is one of the challenges mentioned by

three respondents constituting 16.7% of the sample. Some of the revenue collectors do

not account for all the moneys they collect from the tax payers in the market since

some of them always duplicate the tickets they issue to the traders and even

sometimes they do not issue tickets at all especially when they feel a particular tax

payer is not educated or does not care about collecting tickets for moneys paid. 33.3%

representing six respondents of the sample indicated that tax evasion, lack of

cooperation from tax payers and pilfering on the part of revenue collectors are all

challenges facing the assembly in its revenue mobilization. Also, an interview with

the budget officer revealed that the assembly faces a challenge in generating revenue

from property taxes. This is as a result of the fact that the assembly does not have

valuers who will place values on the properties of tax payers to enable the assembly

gets the needed revenue from property taxes.

4.4.4 Challenges taxpayers usually face

Table 4.4.2 below represents responses given by the general public about the

challenges they encounter in honoring their taxes obligations. Out of the hundred and

twelve respondents, 56 people constituting 50% of the sample indicated that time of

payment of taxes is not favorable or sometimes not known as a challenge. The

taxpayers think that the time the assembly gives for payment of taxes poses a

challenge to them because of the fact that as at the time the revenue collectors usually



48

come to take the taxes they do not sometimes have money to pay. An interview with

some taxpayers revealed that sometimes, some of the collectors even come in the

night to take taxes which causes them a lot of inconvenience. This challenge needs to

be looked into and adjusted if possible to ensure favorable time of payment for

taxpayers. Fifteen respondents representing 13.4% of the sample mentioned place of

payment not known as a challenge. Some taxpayers are always ready to pay the tax

but they do not always know where to go and pay. This implies that the revenue

offices are not situated at strategic points where taxpayers can easily locate. Twenty-

nine respondents representing 25.9% of the sample mentioned the tax amount as

always being too much as a challenge for them. According to them the tax system is

not fair because the amount they are always charged do not reflect the amount of

income they earned. Twelve respondents representing 10.7% of the sample indicated

that one of the challenges they face is that sometimes that tax collectors do not always

come to them for the taxes. This means that they have to go to the internal revenue

office to honor their tax obligation but due to the busy nature of their businesses they

are sometimes unable to do that and as a result they have been encountering

challenges with the assembly.

Table 4.4.2 challenges faced by tax payers in paying taxes

Valid Frequency Percent Validpercent

Cumulativefrequency

Time of payment not favorable or not known 56 50 50 50

Placement of payment not known 15 13.4 13.4 63.4

The tax amount is always too much 29 25.9 25.9 89.3

Collectors do not come to take the taxes

sometimes

12 10.7 10.7 100

Total 112 100 100




4.4.5 Challenges reve

Figure 4.4.3 Challen

Source: Field Survey

Figure 4.4.3 above sh

challenges they face

challenges that they f

them to discharge th

receipt books do get fi

and motor vehicles w

town to collect the t

revenue they are able

75% of the sample i

challenge that they do

willing to honor their

are being used for and

One respondent also

businesses. There are

5%1

49

nue collectors usually encounter

es faced by revenue collectors in collectin

February, 2012.

ows the responses by twenty revenue colle

in collecting revenues. Two respondents s

ced is that they do not have adequate logist

ir responsibilities effectively. They said t

nish on the field and also they do not have l

hich they can use to ease their movements

xes from taxpayers and as a result it redu

to generate for the assembly. Fifteen respo

ndicated that lack of co-operation from t

face on the field. They said some taxpayers

tax obligation because they do not know w

also due to their lack of knowledge about t

aid that they sometimes find it difficult to

some businesses that are not registered and

10%

75%

% Inadequate

Lack of co-o

from tax pa

Difficulty in

unregistere

All the abov

revenue

ctors regarding the

id that one of the

ics that will enable

hat sometimes the

gistics such as cars

around the whole

ces the amount of

dents representing

axpayers is also a

are sometimes not

hat the tax moneys

he need to pay tax.

locate unregistered

as a result they do

ogistics

peration

ers

locating

businesses



50

not have their addresses or information concerning where they are situated and this

makes it difficult for them to trace such businesses to ensure that they pay their taxes.

Two respondents representing 10% of the sample indicated that inadequate logistics,

lack of co-operation from taxpayers, difficulty in locating unregistered businesses are

the challenges that they face in collecting revenues.

4.5 REMEDIES TO THE CHALLENGES OF FISCAL DECENTRALIZATION

This section covers the suggested solutions to overcoming the challenges the

assembly encounters in acquiring loans, in preparing its budgets, in mobilizing

revenue, the challenges taxpayers face in paying taxes and also the challenges revenue

collectors encounter in mobilizing revenue for the assembly.

4.5.1 Measures to overcome challenges in borrowing funds

Table 4.5.1 Measures to overcome assembly’s challenges in borrowing funds

Valid

Frequency Percent

Valid

Percent

Cumulative

Percent

Charging of moderate interest on loans

by financial institutions1 5.6 5.6 5.6

Financial institutions should demand a

reasonable amount of collateral

security

9 50.0 50.0 55.6

Financial institutions should extendperiod of repayment of loans if

necessary

1 5.6 5.6 61.1

Other: The ceiling should be reviewed

upwards7 38.9 38.9 100.0

Total 18 100.0 100.0




51

Table 4.5.1 above depicts the responses given by eighteen respondents about

measures to be put in place to overcome challenges the assembly face in borrowing

funds. Out of the eighteen respondents, one said that financial institutions should

charge moderate interest on loans. Since basic interest rates are usually fixed by the

Bank of Ghana (BoG) in collaboration with the Ministry of Finance, they should try

to reduce the basic rate which will enable the banks to also reduce the interest rates

they charge on loans. Nine respondents representing 50% of the sample indicated that

financial institutions should demand a reasonable amount of collateral security.

Financial institutions should reduce the amount of collateral they require before

advancing loans to borrowers which will enable most borrowers especially the

assembly to meet these borrowing requirements. One respondent representing 5.6% of

the sample further indicated that financial institutions should extend the period of

repayment of loans if necessary. This will allow MMDAs enough time to generate

revenue from their various revenue sources to repay such loans and also allow them to

use such loans to invest in long term projects. Seven respondents representing 38.9%

suggested that the MMDAs borrowing ceiling of GH¢2000 should be reviewed

upwards. This will enable the MMDAs to raise sufficient funds through loans in order

to finance their budgets and also to undertake developmental projects.



4.5.2 Measures to ov

Figure 4.5.1 Measur

Source: Field Survey

Figure 4.5.1 depicts

measures that can be

the assembly. Four res

carry out public sensi

media, use of informa

their tax moneys are

obligations. Three res

the assembly should e

This can be done by s

pay taxes. The assem

conduct surprise chec

issuing receipts to th

assembly should punis

the same acts. This

against them, closing

0

2

4

6

8

10

12

&ducation o

u(!ic on t$e

to ay ta

F r e q u e n c y

52

rcome challenges in mobilizing revenue

s to be put in place to ensure effective rev

, February 2012.

he responses given by eighteen staff mem

ut in place in order to ensure effective reve

pondents out of the eighteen indicated that t

tization on the need to pay tax. They can

tion vans among others. This will enlighten

eing used thereby motivating them to alw

ondents representing 16.7% of the sample f

sure that revenue collectors always issue re

ensitizing the public to always insist on rec

ly can also set up a surveillance committee

ks on tax payers to ensure that revenue col

em any time they pay taxes. One person

h tax evaders severely in order to deter other

an be done by confiscating their goods, t

their shops or banning them completely

eri

+ t$e

need

'

/nsist t$e issue o+

receits to ta'

ayers

evere!y unis$in)

ta' evaders to

deter ot$ers

!! t$

nue generation

bers regarding the

ue mobilization in

e assembly should

o this through the

the public on how

ys honor their tax

rther indicated that

eipts to tax payers.

ipts any time they

which will always

lectors are actually

also said that the

s from perpetrating

king legal actions

from operation by

es1 10

e a(ove



53

taking their operating licenses from them. Ten respondents constituting 55.6% of the

sample indicated that: education of the public on the need to pay tax, insisting on the

issue of receipts to tax payers, and severely punishing tax evaders in order to deter

others, are some of the measures that the assembly can put in place in order to ensure

effective revenue mobilization in the assembly.

Source: Field Survey February, 2012

Table 4.5.2 above depicts the responses given by the twenty revenue collectors with

regards how the challenges they face can be overcome. Fourteen respondents

representing 70% of the sample said that there should be public sensitization on the

need to pay tax. The assembly should educate the public on why they should pay

taxes in order for the assembly to undertake developmental projects and provide other

social amenities. Three respondents representing 15% of the sample also suggested

that the assembly should provide them with adequate logistics necessary for them to

execute their responsibilities effectively and efficiently. These logistics include; motor

4.5.3 Measures to overcome challenges revenue collectors face

Table 4.5.2 Measures to overcome the challenges revenue collectors face

Valid Frequency Percent

Valid

Percent

Cumulative

Percent

Public sensitization on tax payment 14 70.0 70.0 70.0

Provision of adequate logistics 3 15.0 15.0 85.0

Public sensitization on the need to register

businesses

1 5.0 5.0 90.0

All the above 2 10.0 10.0 100.0

Total 20 100.0 100.0



55

assembly can put in place in order to overcome the challenges it encounters in

preparing its budgets. Five respondents constituting 27.78% of the sample said that

having more budget staff in the assembly, organizing training programmes for the

budget staff, and employment of economic and statistical models in making budget

estimates are some of the measures that can be used to overcome the challenges the

assembly faces in preparing its budgets.

Table 4.5.3 Measures to overcome the challenges the assembly encounter in

preparing its budgets

Valid

Frequency Percent

Valid

Percent

Cumulative

Percent

The assembly should be given more budget

staff

2 11.11 11.11 11.11

Training for budget staff 8 44.44 44.44 55.55

Employment of economic and statistical

models in making budget estimates

1 5.56 5.56 61.11

Both B and C 2 11.11 11.11 72.22

All the above 5 27.78 27.78 100.0

Total 18 100.0 100.0

Source: Field Survey February, 2012

4.5.5 Measures to overcome challenges taxpayers face

As can be seen from table 4.5.4 below, 48.2% of the sample representing fifty-four

members stated that as a measure to overcome some of the challenges taxpayers face

in honoring their tax responsibility, people should only be taxed when they have made



56

sales. With this measure honored, no tax payer would have any excuse not to pay their

taxes when they are due. Also seven respondents forming 6.3% of the sample

indicated that duly informing taxpayers of the places where they can at their

convenience go and pay their taxes is yet another measure towards combating the

challenges taxpayers face in honoring their tax obligations. This will enable taxpayers

to pay their taxes as to and when they are capable. Twenty-eight people representing

25% of the sample suggested that making the tax system fair to all is a measure

towards overcoming the challenges that taxpayers face in paying their tax. This will

ensure equity in the tax system as well. 20.5% of the sample representing twenty-

three people indicated that tax collectors should always come at the right time for

taxes. This would enable the tax payers to honor their tax liabilities at the times they

have the means to do so.

Source: Field Survey February, 2012.

Table 4.5.4 Measures to overcome challenges faced by taxpayers in paying taxes

Valid

Frequency Percent

Valid

Percent

Cumulative

Percent

People should be taxed only

when they have made sales54 48.2 48.2 48.2

Informing people about

places for tax payment7 6.3 6.3 54.5

The tax system should be fair 28 25.0 25.0 79.5

Collectors should come at

the right time23 20.5 20.5 100.0

Total 112 100 100



57

4.6 PROSPECTS OF FISCAL DECENTRALIZATION

This section examines the way forward of fiscal decentralization in the Wa

Municipality. For fiscal decentralization programme to be effective in the Wa

Municipality, the following elements must be present:

4.6.1 An adequate enabling environment

The establishment of the Local Government Act was a move towards transferring

powers and responsibilities to MMDAs to operate effectively. This provides a

foundation on which to build decentralization, but it does not by any means guarantee

successful fiscal decentralization. Even though the local government act was

established to transfer powers and responsibilities to MMDAs to operate effectively, it

has placed certain restrictions on them like not borrowing beyond the ceiling of

GH¢2000. Other elements however must be present in order to create an enabling

environment for MMDAs to operate effectively. There must be a strong national will

to decentralize; this is present as the central government has adopted the composite

budget approach to facilitate the transfer of resources to MMDAs, there must be

development of special-purpose some-what more “neutral” and high-level

mechanisms to oversee and co-ordinate decentralization and local government reform

however, fiscal decentralization programmes in the Wa Municipality are under the

direction of fairly bureaucratized, often competing, and poorly co-ordinated central

agencies such as local government, finance and planning among others with a direct

stake (loss of power) in decentralization, and development of significant transfer

programmes that will allow central government to transfer substantial proportions of

total central revenues to MMDAs however, the proportion of these transfers to

MMDAs is inadequate for them to carry out their responsibilities.



58

4.6.2 Assignment of an appropriate set of functions to local governments

Central government should always decentralize appropriate set of functions to

MMDAs to enable them operate effectively however, regardless of what the

constitution or law says, central government agencies in Ghana do not have the desire

to decentralize services they have been providing, especially where this involves a

loss of prestige and resources to them and they perceive each other as competitors.

Also, decentralization of sectors to MMDAs should commensurate with their capacity

to handle these sectors however; MMDAs in Ghana are always given a lot of

functions and responsibilities without the necessary accompanying resources for them

to carry them out.

4.6.3 Assignment of an appropriate set of local own-source revenues to local

governments

Central government should always assign appropriate set of local own-source

revenues to MMDAs to enable them operate effectively. On the contrary, the sources

of revenue assigned to MMDAs in Ghana are inadequate to meet their local

expenditure requirements because lucrative tax fields (for example, income tax, sales

tax, import and export duties) all belong to the central government, while local

government has access to only low yielding taxes such as basic rates and market tolls.

4.6.4 The establishment of an adequate intergovernmental fiscal transfer system

The limited sources of revenue for the MMDAs make it difficult for them to generate

enough revenue to meet their expenditure requirements. Therefore, central

government should develop intergovernmental fiscal transfer systems to help: cover

local government fiscal imbalances, supplement inadequate local own-source

revenues to improve the ability of local governments to meet their expenditure



59

responsibilities, meet national redistribution objectives thereby helping to offset fiscal

capacity differences among local governments, encourage local expenditures on

particular goods and services that exhibit positive externalities or are considered to be

basic needs that should be distributed less unequally than the ability to pay for them.

However, the five percent of national revenue which is always transfer to MMDAs as

DACF is insufficient considering the broad range of responsibilities assigned to them.

4.6.5 The establishment of adequate access of local governments to development

capital

Since the sources of revenues for MMDAs in Ghana are limited and

intergovernmental transfers to them is not sufficient, there is the need for central

government to allow MMDAs to access sufficient funds from financial institutions to

supplement their budgets. On the contrary, MMDAs in Ghana though are allowed to

borrow; this borrowing power is restricted to a ceiling of GH¢2000 which is not

sufficient.



60

CHAPTER FIVE

SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.1 INTRODUCTION

This chapter focuses on summarizing the research findings about the challenges faced

by MMDAs in implementing fiscal decentralization and making recommendations for

the way forward based on the findings of this study.

5.2 SUMMARY OFFINDINGS

5.2.1 The extent of decentralization of fiscal powers

Generally, the extent of decentralization of fiscal powers in the municipality is not a

complete one and this is applicable to other MMDAs in Ghana. The assembly has the

power to generate, retain and use its revenue, the power to prepare and approve its

budgets, power to invest surplus funds if any and the power to borrow funds where

necessary to supplement its budget deficits, however, this power to borrow is

restricted to a ceiling of GH¢2000. This makes it difficult for the assembly to

undertake developmental projects which will involve any amount more than

GH¢2000 and which are to be financed through loans. When it comes to the issue of

the DACF, the assembly has no power to use the DACF at its own discretion. The

DACF usually comes with an ambit of vote (spending warrant) and the assembly must

disburse the DACF strictly according to the instructions of the warrant. In a whole,

complete fiscal powers have not been transferred to MMDAs in Ghana. While some

fiscal powers have been transferred to them, the central government still holds onto

some, which are crucial for the effective operations of MMDAs in Ghana.



61

5.2.2 Effectiveness of fiscal decentralization

The situation of fiscal decentralization in the municipality is generally ineffective.

This is clear from the revenue performance of the municipality. In 2009, the assembly

estimated to generate a total amount of GH¢5,095,453.80. Out of this amount, the

assembly was able to generate only 43.68% (GH¢2,225,631.88) resulting in adverse

variance of GH¢ 2,869,821.92. In 2010, 18.25% (GH¢3,568,155.87) of the budgeted

amount was generated out of a total budgeted amount of GH¢19,555,261.00 which

resulted in an adverse variance of GH¢ 15,858,105.13. Although there is a marginal

increase in the amount of revenue generated in 2010, this amount is still far below the

budgeted amount. The assembly’s inability to meet its budget estimates makes it

dependent on the central government in fulfilling its mandate of providing services to

people at the grass-root level. This ineffectiveness in revenue generation could be as a

result of leakages in revenue generation system, low level of education on the part of

revenue collectors and tax payers, ineffective and inexperienced budget officers who

cannot make attainable budget estimates and the assembly not making good use of all

its sources of finance, especially in the area of property tax where the assembly does

not have valuers to value the numerous properties in the assembly to enable it tap

revenue from property tax. It is realized that the assembly does not prepare variance

analysis of its budgeted and actual results with regard to its revenue. This makes it

difficult for the assembly to assess its revenue performance.

5.2.3 The challenges of fiscal decentralization

With regard to budget preparation, even though the assembly is given complete power

to prepare and approve its own budgets, the assembly faces many challenges in

performing this task.



62

These challenges include; inadequate budget staff which inhibits on time budget

preparation and inadequate skills on the part of some budget staff resulting in

difficulty in making realistic and reliable budget estimates. In terms of revenue

generation, though the assembly has been given the power to generate, retain and use

its revenue there are certain challenges the assembly encounters in doing so. There is

always lack of cooperation from tax payers. Tax payers are not always willing to

honor their tax obligation simply because they fill they do not receive any benefit

from the assembly and due to lack of public sensitization on the need to pay tax. Also,

pilfering on the part of some revenue collectors is yet another challenge. Collectors

sometimes get away with some moneys generated out of tax collections as a result of

weaknesses in internal controls. Again most tax payers evade taxes in several ways

which poses another challenge to the assembly in terms of its revenue generation and

inadequate logistics for collectors to work with.

High interest rates charged by financial institutions poses a challenge to the assembly

as regards loan acquisition. Furthermore, the assembly does not have enough

collateral required by financial institutions before advancing loans to the assembly

and the borrowing power of the assembly is limited to a ceiling of GH¢2000 making

it sometimes difficult for the assembly to meet its borrowing requirements.

5.2.4 Remedies to the challenges of fiscal decentralization

In order to overcome the challenges the assembly faces in acquiring loans, financial

institutions should charge moderate interest on loans. Since basic interest rates are

usually fixed by the Bank of Ghana (BoG) in collaboration with the Ministry of

Finance, they should try to reduce the basic rate which will enable the banks to also

reduce the interest rates they charge on loans. Also, the borrowing ceiling of



63

GH¢2000 should be reviewed upwards to enable MMDAs raise sufficient funds

through loans in order to finance their budgets and also to undertake developmental

projects.

To overcome the challenges the assembly encounters in generating revenue, there

should be public sensitization on the need to pay tax. This will enlighten the public on

how their tax moneys are being used thereby motivating them to always honor their

tax obligations. Furthermore, the assembly should ensure that revenue collectors

always issue receipts to tax payers. This can be done by sensitizing the public to

always insist on receipts any time they pay taxes. Revenue collectors should as well

be provided with adequate logistics to enable them discharge their responsibilities

effectively. Also, the assembly should punish tax evaders severely in order to deter

others from perpetrating the same acts. This can be done by confiscating their goods,

taking legal actions against them, closing their shops or banning them completely

from operation by taking their operating licenses from them.

In overcoming the challenges the assembly faces in preparing its budgets, the

assembly should be given more budget staff in order to help reduce the work load that

is placed on the few budget staff. This would help reduce the pressure that is always

on the budget staff to prepare budgets on time thereby minimizing errors in the

budgets. Furthermore, the assembly should organize periodic training programmes for

its budget staff in order to help improve on their knowledge in budget preparation. In

curbing the challenges face by taxpayers in paying taxes, taxpayers should only be

taxed when they have made sales. By so doing, no tax payer would have any excuse

not to pay their taxes when they are due.



64

5.2.5 Prospects of fiscal decentralization

Despite the incomplete effectiveness of fiscal decentralization in the Wa Municipality

and other MMDAs in Ghana as a result of the numerous challenges they encounter in

carrying out their responsibilities to the fullest, all hope is not yet, as the creation of

an enabling environment through: the establishment of the Local Government Act as a

move towards transferring powers and responsibilities to MMDAs to operate

effectively, ensuring the existence of a strong national will to decentralize,

development of special-purpose some-what more “neutral” and high-level

mechanisms to oversee and co-ordinate decentralization and local government reform

to eliminate bureaucracy and the development of significant transfer programmes that

will allow central government to transfer substantial proportions of total central

revenues to MMDAs would provide enough breeding grounds for effective fiscal

decentralization to thrive. Furthermore, the assignment of an appropriate set of

functions to local governments through the decentralization of appropriate services

and the provision of the requisite resources to enable them provide such services is a

step in the right direction. Also, fiscal decentralization can be enhanced through the

assignment of an appropriate set of local own-source revenues to local governments.

This would enable them mobilize enough revenue to meet their budget requirements.

To add to that, despite the inadequacy of intergovernmental fiscal transfers, there is

still light at the end of the tunnel since there is still room for the central government to

improve upon such transfers.

Even though there is inadequate access of local governments to development capital,

as a result of their limited sources of revenues and insufficient intergovernmental

transfers to them, there is still room for improvement since the central government



65

can allow MMDAs more access to sufficient funds from financial institutions to

supplement their budgets.

5.3. Recommendations

Based on the findings of our study, the following recommendations have been given:

• The Wa municipality like most districts in Ghana is unable to meet its revenue

and expenditure targets not because it has limited powers to operate but

because the assembly is not fully utilizing its sources of revenue like property

taxes. This study therefore suggests that the assembly should employ the

services of valuers who will value the numerous properties in the assembly to

enable it tap revenue from property tax which is aimed to be the major source

of tax revenue for the assembly.

• Even though the establishment of the Local Government Act was intended to

provide an adequate enabling environment for MMMDAs to operate

effectively, it also poses some restrictions on their operations including the

borrowing ceiling of GH¢2000.Wetherefore recommend that this ceiling

should be reviewed upwards or possibly removed completely. This would

enable MMDAs to have access to sufficient funds for their developmental

activities.

•

The sources of revenue assigned to MMDAs in Ghana are also inadequate to

meet their local expenditure requirements because lucrative tax fields (for

example, income tax, sales tax, import and export duties) all belong to the

central government, while local government has access to only low yielding

taxes such as basic rates and market tolls. We therefore recommend that more

lucrative tax fields should be opened to MMDAs to ensure that appropriate set

of local own-sources of revenues are available to local governments.



66

5.4 Recommendation for further research

Since this study could not cover much on the investment aspect of fiscal

decentralization in Ghana, we recommend that further research be conducted in this

area.

5.5 Conclusion

It is evident from the analysis that MMDAs in Ghana have not been given absolute

power to operate without interference from the central government. Although the

MMDAs are allowed to borrow, this borrowing power is restricted to a ceiling of

GH¢2000 which is totally inadequate. The central government should therefore

consider this restriction by either eliminating it or reviewing the amount upwards to

give MMDAs the opportunity to borrow amount they think is sufficient to supplement

their budgets to be able to provide the needed services required by the local people. It

is also realized from this research that MMDAs do not have absolute power to use the

DACF at their own discretion. Since MMDAs are at the grass-root level, they are in a

position to know the needs of the people better than central government does.

Therefore, central government should give MMDAs the opportunity to use their share

of the DACF at their own discretion but monitor what the DACF is used for to ensure

transparency, probity, and accountability. Also, it can be inferred from the study that

MMDAs in Ghana have been given complete power to generate, retain and use their

own revenue. However, they face a lot of challenges in mobilizing revenue.

Sometimes taxpayers do not cooperate with revenue collectors when they go on their

rounds to collect revenue and this has reduced the amount of revenue the assemblies

can generate. Therefore, MMDAs should undertake tax education programmes to

educate taxpayers on the importance of paying taxes and the benefits thereof. The

salaries paid to the revenue collectors should be linked to the amount of revenue they



67

are able mobilize thereby enabling them to avoid pilferage and generate more revenue

for the assemblies. Furthermore, it can also be inferred from the study that MMDAs

are given complete power to prepare and approve their own budgets. However, they

face a lot of challenges in preparing their budgets some of which are inadequacy of

budget staff, inadequate skills on the part of some budget staff, and difficulty in

making realistic and reliable budget estimates. The MMDAs should be given more

qualified and competent budget staff and also MMDAs should endeavor to organize

periodic training programmes for their budget staff in order to equip them with more

skills in using statistical and economic models in making realistic and reliable budget

estimates.



68

REFERENCES

• Adam B. E. (2007). Fiscal Decentralization and Public Service Delivery in South

Africa

• Ahmed, J., Devarajan, S., Khemani, S., and S. Shah (2005) “Decentralization and

services delivery”, World Bank Policy research Paper 3603, World Bank.

Washington, D.C.

• Ahwoi, K. (2009), The Legal Framework for Decentralization: Issues and

Challenges, Decentralization Agenda, Edition 11, September 2009, P 2

•

Akai, N and Sakata, M. 2002: Fiscal decentralization contributes to economic

growth: evidence from state-level cross-section data for the United States. Journal

of Urban Economics52: 93–108.

• Atakora N.A. (2006), ‘Decentralization and effective revenue mobilization: A

case study of the Nkruanza District Assembly’ GIMPA Journal of management

and leadership vol. No. 2, 2006

• Ayee J. (1992). Decentralization and effective government: the case of Ghana’s

district assemblies. Africa insight 22(1): 49-56.

• Ayee J.R.A.(2003) , ‘Decentralization and local governance: the Ghanaian

experience’, local government in Ghana, grass root participation in the 2002 local

government elections, in Ninsin, K A. Amponsah, N. and Arthur-Boafo K, (

University of Ghana) Uniflow publishing ltd (2003)

• Ayee, J.R.A. (2004). “Ghana: A Top-Down Initiative” in Olowu D and Wunsch J.

(eds) Local Governance in Africa: The Challenges of Democratic

Decentralization. Boulder, CO. /London: Lynne Rienner: 125–154.

• Ayee, J.R.A. (1994). An Anatomy of Public Policy Implementation: The Case of

Decentralization Policies in Ghana. Avebury: Aldershot.



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• Ayee, J.R.A. (2000), Decentralization and Good Governance in Ghana,

unpublished paper of May 2000 prepared for the Canadian High Commission,

Accra, Ghana.

• Ayee, J.R.A. (2008a). “The Balance Sheet of Decentralization in Ghana” in F.

Saito (ed.) Foundations for Local Governance: Decentralization in Comparative

Perspective (Leipzig: Physica-Verlag), Chapter 11.

• Bardhan, P and Mookherjee, D. 2000: Capture and governance at local and

national levels. American Economic Review90: 135–139

•

Bardhan, P., and Mookherjee, D. (eds.). 2006. Decentralization and local

governance in developing countries: A comparative perspective. Boston: MIT

Press.

• Cochrane, G. Policies for Strengthening Local Government in Developing

Countries, World Bank Staff Working Paper No. 582, World Bank, Washington,

DC, 1983.

• Davoodi, H and Zou, H. 1998: Fiscal decentralization and economic growth: a

cross-country study. Journal of Urban Economics43: 244–257.

• De Mello, l. Jr (2000b) “Fiscal decentralization and intergovernmental fiscal

relations: A cross-country analysis,” World Development. Vol. 28, No. 2, pp.365-

380.

• European Bank for Reconstruction and Development. 1998: Transition Report.

EBRD: London.

• Guimaraes, J. P. (1997) “The new federal system in the Sudan: Some main aspects

and implications for planning”, East Africa Social Science Research Review, Vol.

XIII, No.1, pp.37-53.



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• Jorge M. Fiscal decentralization in Asia: Challenges and opportunities.

Mandaluyong City, Philippines: Asian Development Bank, 2011.

• Kokor, J. Y. and Kroes, G. (2000) Central Grants for Local Development in a

Decentralised Planning System, Ghana. SPRING Research Series Number 23.

SPRING Centre, University of Dortmund.

• Kunfaa, E. Y. (2002) “Decentralization, Poverty and Public Expenditure on Social

Services” in Poverty Reduction through Good Governance. The Experience of

Ghana. Dinye, R. D. and Ofei-Aboagye, E. (2002) (eds.). Department of Rural

Housing and Planning Research, KNUST-Kumasi.

• Lockwood, B. 2006. The political economy of decentralization. In E. Ahmad and

G. Brosio (eds.), Handbook of Fiscal Federalism, 33–60. Northampton, MA:

Edward Elgar Publishing.

• Martinez-Vazquez, J and McNab, R. 2003: Fiscal decentralization and economic

growth. World Development31: 1597–1616.

• Mills, J .E. A.(2000) ‘opening address’, a decade of decentralization in Ghana,

retrospect and prospects in Thomi W, Yankson P,W.K &Zanu S.Y. EPAD

Research Project/ ministry of Local government &rural development (2000)

• Nkrumah, S.A. (2000), ‘Decentralization for Good Governance and Development:

The Ghanaian Experience’ in Regional Development Dialogue vol.21 no.1, pp.53-

67

• Nuama Y. (2002) ‘District Assemblies; A decade of revenue mobilization for

development (1989-1999): A case study of Birim South District Assembly’ Local

government in Ghana, grass root participation in the 2002 local government

elections, in Ninsin, K A. Amponsah, N. and Arthur-Boafo K, ( University of

Ghana). Uniflow publishing ltd p.93



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• Oyugi, W.O. (2000), ‘Decentralization for Good Governance and Development’

in Regional Development Dialogue vol.21 no.1, pp.3-22

• Rondinelli, D. (1983). Implementing Decentralization programmes in Asia: a

comparative analysis. Public Administration and Development, 3: 181-207.

• Smoke, P. (2001), Fiscal Decentralization in Developing Countries: A Review of

Current Concepts and Practices. United Nations Research Institute for Social

Development, Programme Paper No. 2

• The 1992 Constitution of the Republic of Ghana, 1992 article 240

•

The local government Services act, 2003 Act 656.

• United States Agency for International Development (USAID) (2003),

‘Decentralization in Ghana: an Assessment’ (mimeo)

• Valdivieso, L. 1998: Macroeconomic developments in the Baltics, Russia, and

other countries of the Former Soviet Union, 1992–97. IMF Occasional paper no.

175 International Monetary Fund: Washington.

• www.localgovernment.gov.gh

• www.statsghana.gov.gh



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APPENDIX

KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY


SCHOOL OF BUSINESS

PROJECT TOPIC: CHALLENGES AND PROSPECTS OF FISCAL

DECENTRALIZATION IN GHANA: A CASE STUDY OF THE WA

MUNICIPALITY

Kindly take some time off your busy schedule to answer the following questions

where applicable. This exercise is entirely academic and information provided would

be treated confidentially and would not be used against the respondent in any way.

PROJECT QUESTIONNAIRE FOR THE GENERAL PUBLIC

1) Gender of respondent

A.

Male B. Female

2) Age of respondent

A. 18-25 B. 26-35 C. 36-45 D. 46 and above

3) Level of Education

A. Basic B. Secondary

C. Tertiary D. Other (specify)………………………

4) Occupation of respondent

A. Dealer in clothing B. Dealer in foodstuffs/food seller

C. Dealer in general provisions D. Other (specify)……………………

5) What benefits do you get from the assembly?

A. Security B. Education and other social amenities

C. Health and Sanitation D. Other (specify)…………………………..



73

6) What are the sources of funds for the assembly?

A. Central government B. Citizens of the district

C. Both central government and citizens of the district D. No idea

7) Do you have any responsibility to pay taxes?

A. Yes B. No

8) If yes, how do you play such role?

A. By cash/cheque B. In kind

C. Communal labour D. Other (specify)…………………….

9)

If no, why?

A. I don’t see the benefits

B. There is no accountability for the use of the taxes we pay

C. District Assembly staff enrich themselves with the taxes we pay

D. Other (specify)………………………………………..

10) Are you aware you have to take a receipt any time you pay taxes?

A. Yes B. No

11) Are you always given a receipt any time you pay taxes?

A. Yes B. No

12) Do you keep records of your activities?

A. Yes B. No

13) How are you assessed for taxes?

A. Collectors tell me any time they come

B.I always know how much to pay

C. The assembly educates me on how to determine my tax liability

D. I do not know how I am assessed



74

14) Do you feel there is equity (fairness) in the way you are being taxed?

A. Yes B. No

15) Are you aware you have to register your business with the District Assembly?

A. Yes B. No

16) Have you registered your business?

A. Yes B. No

17) If no, why?

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

18) Do you face any challenges in paying taxes?

A. Yes B. No

19) If yes, what are some of these challenges?

A. Time of payment not favorable B. I do not know where to pay my

tax

B. The tax amount is always too much C. Other (specify)……………

20) In your opinion, how can these challenges be overcome?

A. People should be taxed only when they have made sales

B. People should be informed about the places for tax payment

C. The tax system should be fair (equitable)

D. Other (specify)………………………….

END OF QUESTIONNAIRE, THANK YOU.



75



SCHOOL OF BUSINESS



MUNICIPALITY

PROJECT QUESTIONNAIRE FOR THE DISTRICT ASSEMBLY STAFF

Kindly take some time off your busy schedule to answer the following questions as

applicable. This exercise is purely academic and information provided would be

treated confidentially and would not be used against the respondent in any way.

1) Gender of respondent

A. Male B. Female

2) Age of respondent

A. 18-25 B. 26-35 C. 36-45 D. 46 and above

3) Level of Education


C. Tertiary D. Other (specify)……………………

4) Does the assembly have the power to invest surplus funds?

A. Yes B. No

5) If yes, how are such funds invested?

A. Given as loan to the general public B. Investment in agriculture



76

C. Investment in fixed assets D. Other (specify)…………………

6) Does the assembly always earn good returns on its investment?

A. Yes always B. Yes but not always C. No

7) What are some of the challenges the assembly encounter in investing surplus

funds?

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

8) What do you think are some of the measures to be put in place to overcome

these

challenges?........................................................................................................

...........................................................................................................................

...........................................................................................................................

9) Is the assembly allowed to borrow funds?

A. Yes B. No

10) If yes, is the assembly restricted to a certain amount?

A. If Yes (how much)……………………………B. No

11) Is the assembly always able to repay its debts as and when they fall due?

A. Yes and at the time they fall due B. Yes but not on the due date

C. Both A and B D. No

12) Does the assembly encounter any challenges in acquiring loans?

A. Yes B. No


A. Lack of/ inadequate collateral B. Unfavorable time of repayment

C. High interest rates D. Other (specify)…………………………



77


these challenges?

A. Financial institutions should charge moderate interest on loans

B. Financial institutions should demand reasonable amount of collateral

security

C. Financial institutions should extend period of repayment of loans if

necessary

D. Other (specify)…………………………………………………

15)

Apart from borrowing, is the assembly given the power to generate its own

revenue?

A. Yes B. No

16) If yes, from which sources?

A. Special levies B. Fines

C. Interest on investments D. Other (specify)…………………

17) How are such revenues used?

A. Retained and used by the assembly B. All is sent to central

government

C. Retain part and send part to central government C. No idea

18) Does the assembly encounter any challenges in generating revenue?

A. Yes B. No


A. Tax evasion B. Lack of corporation from tax payers

B. Pilfering on the part of revenue collectors D. Other (specify)…..…



78

20) What do you think are some of the measures to be put in place to ensure

effective revenue generation?

A. Education of the public on the need to pay tax

B. Insists on issue of receipts to tax payers

C. Severely punishing tax evaders in order to deter others

D. Other (specify)…………………………………….

21) Is the assembly allowed to use its share of the District Assembly Common

Fund without any restrictions?

A. Yes B. No

22) If no, what are some of these restrictions?

………………………………………………………………………………

………………………………………………………………………………

………………………………………………………………………………

23) To what extent is the assembly given the power to prepare and approve its

budgets?

A. power to prepare only B. power to prepare and approve

C .Other (specify)………………………………………………

24) Does the assembly always meet its budget plans?

A. Able to meet both revenue and expenditure plans

B. Able to meet only revenue plans

C. Able to meet only expenditure plans

D. Unable to meet both revenue and expenditure plans

25) Does the assembly encounter any challenges in the preparation of its

budgets?

A. Yes B. No



79


A. Inadequate budget staff

B. Inadequate skills on the part of some budget staff

C. Difficulty in making budget estimates

D. Other (specify)………………………………………


these challenge?

A.

The assembly should be given more budget staff

B. Training for budget staff

C. Employment of economic and statistical models in making budget

estimates

D. Other (specify)…………………………………………………………..

END OF QUESTIONNAIRE, THANK YOU.



80



SCHOOL OF BUSINESS



MUNICIPALITY

Please kindly take some time off your busy schedule to answer the following

questions as applicable. This is purely an academic exercise and information provided

would be treated confidentially and would not be used against the respondent in any

way.

PROJECT QUESTIONNAIRE FOR REVENUE COLLECTORS

1. Gender of respondent

A. Male B. Female

2. Level of education


B. Tertiary C. Other (specify)…………………………………..

3. Are you taken through training on your field of work?

A. Yes B. No

4. If yes, how often?

A. Annually B. semi-annually

C. Quarterly D. other (specify)………………………



5. Do you face any challenges on the field?

A. Yes B. No

6. If yes, what are some of these challenges?

A.

Inadequate logistics B. Lack of co-operation from taxpayers

C. Difficulty in locating unregistered businesses

D. Other (specify)…………………….

7. To whom do you report these challenges?

A. Municipal Chief Executive

B. Municipal Finance Officer

C. Municipal Coordinating Director

D. Other (specify)………………………….

8. Do they respond to these challenges when you report?

A. Yes B. No

9. If yes, how quick do they respond?

A. Immediately B. Late C. Very late

10. In your opinion, how can these challenges be overcome?

A. Public sensitization on tax payment

B. Provision of adequate logistics

C. Public sensitization on the need to register businesses

D. Other (specify)……………………………………………………

final project- fiscal decentralization(1)-1

Documents