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Local Level Financial Systems: A Study on Three Union at Sylhet Sadar Upazilla in Bangladesh

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BSTRACT

In this research paper has tried to show, first look at the context of financial systems of local level finance particularly three union at Sylhet Sadar Upazilla. This study conducted following mixed (both qualitative and quotative research) approach based on primary and secondary source to give out purpose of this study. Some case studies have considered reveal the study findings. This study intended to represent picture of local finance system at grassroots level. Findings also suggest that, effective local government procurement policies and practices contribute to sound financial management.

Keywords: Finance, Local Level, System, Local Government

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Local Level Financial Systems: A Study on Three Union at Sylhet Sadar Upazilla in Bangladesh

  1. 1. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 Triple A Research Journal of Social Science and Humanity (ISSN: 2636-5472) Vol.2(2): 038 - 047, July 2018 Available online: http://www.triplearesjournal.org/jssh Copyright ©2018 Triple A Research Journal Full Length Research Paper Local Level Financial Systems: A Study on Three Union at Sylhet Sadar Upazilla in Bangladesh MD. Anwar Hossain Master of Research Students, Department of Public Administration, Shahjalal University of Science and Technology, Sylhet, Bangladesh Author: MD. Anwar Hossain Master of Research Students, Department of Public Administration, Shahjalal University of Science and Technology, Sylhet, Bangladesh Email address: ahossain.anwar@gmail.com ABSTRACT In this research paper has tried to show, first look at the context of financial systems of local level finance particularly three union at Sylhet Sadar Upazilla. This study conducted following mixed (both qualitative and quotative research) approach based on primary and secondary source to give out purpose of this study. Some case studies have considered reveal the study findings. This study intended to represent picture of local finance system at grassroots level. Findings also suggest that, effective local government procurement policies and practices contribute to sound financial management. Keywords: Finance, Local Level, System, Local Government INTRODUCTION Greater decentralization of government functions must be accompanied by concomitant fiscal devolution as well as increasing capacity of local governments to raise revenues on their indeed, one of the guiding principles of decentralization requires the devolution of financial powers to follow functional devolution. In other words, the extent of autonomy depends on the extent to which local bodies can raise revenues independently and allocate their resources for expenditure. From a fiscal perspective, Bangladesh is a highly centralized state. Bangladesh lags behinds most countries of its size (e.g. Indonesia and South Africa) in terms of local government expenditures which yet to cross three% of GDP. Further, the extent of fiscal powers accorded to various tiers of local governments is also very limited. (Salehuddin, 2014:7) The Local bodies in Bangladesh are in constant shortage of funds. The sources of their income are generally taxes, rates, fees and charges levied by the local body as well as rents and profits accruing from properties of the local body and sums received through its services. Contribution from individuals and institutions, government grants, profits from investments, receipts accruing from the trusts placed with the local bodies, loans raised by the local body and proceeds from such services are another source of income governments may direct to be placed at the disposal of local body. Holding taxes is the most important source of own income of local bodies. Loans and voluntary contributions are rare. Non-tax revenues are of two kinds: fees and tolls and rents and profits on properties of the local bodies. (Salehuddin,2014:7) Total annual local government expenditure as a percentage of gross domestic products has hardly crossed more than 3% in Bangladesh (Fox and Menon,2008). As a matter of fact, the local government financial system in Bangladesh is one of the most centralized in the world. Total annual local government expenditure as a percentage of total consolidated government expenditure is estimated to be in the range of 2-3% on an average. Comparable figures for Indonesia or South Africa, two countries that decentralized within the past 20 years, are 34% and 52%, respectively (Das ND). On the revenue side, most major tax bases in Bangladesh remain under the control of the central government. While own source revenue potential varies vertically across different levels as well as horizontally across different institutions at each level, less than 2% of total government revenue is
  2. 2. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 039 Triple A Res. J. Soc. Sci. Human. collected at local levels, again placing Bangladesh at the lowest end internationally (Das ND). The general objective of this study is firstly: evaluating local level financial system in Bangladesh and Secondly: to find out dimension of local level financial systems. Perspective of Local Finance Financial condition may be defined as the ability of a local government to balance recurring expenditure needs with recurring revenue sources, while providing services on a continuing basis. A community in good financial condition generally maintains adequate service levels during fiscal downturns, identifies and adjusts to long-term economic or demographic changes, and develops resources to meet future needs. Financial condition is affected by a combination of environmental, fiscal and organizational factors, including decisions and actions of the governing board (ICMA, 2003). For example, a steady population decline can lead to an erosion of the property tax base (a negative environmental trend). However, the ways in which local officials respond to this decline (such as cutting services, increasing tax rates, or engaging in economic development) also affect the financial condition of the local government. Financial factors include intergovernmental constraints such as tax and debt limits, access to major revenue sources (such as sales tax), and mandated expenditure requirements. These fiscal constraints often limit the choices available to local officials in managing their budgets. Organizational factors include management practices and legislative policies that guide fiscal decision making, often in response to environmental or political factors. While sound budgeting and management practices can help protect the financial condition of local governments and school districts, these factors cannot always avert fiscal stress — especially when negative environmental trends are severe. However, poor budgeting and management practices can create fiscal problems despite a sound economic environment. Environmental factors include measures of community needs and resources such as population, property value and poverty, and economic factors such as inflation, personal income and employment. These environmental indicators often provide the best “early warning” of future fiscal stress. Research by OSC has concluded that there is a strong correlation between environmental factors and financial condition, and that fiscal stress is often apparent in these measures before it is evident in the financial data. Local finance simply defined as local bodies and their financial responsibilities, local taxation, and measures for improvement of local finance. On the other hand, the mobility may be endogenous to the revenue or expenditure actions taken by the local public authority and this must be considered in any economic analysis of local finance (Quigley, 2008:2). Moreover, local finance is compared of regular and special revenues. Tax and non- tax revenue sources are regular revenue, while subsidies, trust funds and borrowing special revenue. Tax revenue sources for local government include locally levied taxes and shared taxes. There is also much non- tax revenue. So, local finance is the broader base of local revenue sources and increased opportunities for local governments to mobilize new revenue sources (Hawn Kim, 2003; 540). Dimension of Local Finance In Bangladesh, the central government is responsible for making a major annual fiscal transfer to the local governments in terms of block grants under the Annual Development Programme (ADP). In fact, ADP funds the development budget of the central government which is financed by the surplus revenue budget, domestic borrowing, external borrowing and aid from donor agencies. The transfers through the ADP are segmented into four major expenditure classifications: sector/programme allocation, self-financed allocation and food assistance (Fox and Menon, 2008) Of these, the block allocations fund the local government block grants. A large share of ADP allocations supports vertically-driven sector programmes that are implemented directly by ministries and their subordinate agencies. Only a small share of allocations is channeled through block allocations, of which smaller share translates into transfers to local governments (Fox and Menon, 2008). Monitoring Systems In the monitoring system of local finance system are throughout the year, the local official adjusts the cash flow forecast as needed and keep the data as current as possible, revising the forecast with any new information that may become available. The actual process of monitoring mechanism local level finance depends on by co-coordinating meeting by local representative. The one co-coordinating meeting held in a month of Union Parishad with the presence of Chairman and member. In the Union Parishad meeting the total amount of the union rates to be realized from the inhabitants of the union in a year is decided upon. The Union Parishad members of the respective areas are made responsible for levying the union rates on the individual households of the villages in consultation with local leaders (Matbars). It is claimed that in fixing the amount of the union rates to be paid by individual households, their economic conditions are always taken into consideration. Auditing and Inspection Systems The financial audit of local level finance assesses the internal control systems that ensure the quality of accounting information and financial reporting. Financial audits include financial statements, accounts, accounting, receipts, and other financially related issues. Financial
  3. 3. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 MD. Anwar Hossain 040 statement audits provide reasonable assurance about whether the financial statements of an audited entity present fairly the financial position, results of operations, and cash flows in conformity with accounting standards. The annual statement is to be forwarded to the prescribed authority by thirty first December of the following year. A copy of the annual statement of accounts is to be placed in the Parishad office for public inspection. After considering all objections and suggestions made by the public, the Parishad is then required to bring it to the notice of the audit authority. The government and the Deputy Commissioner (DC) are mentioned as the prescribed authority. The Upazilla accounts officer maintained accounts of receipts and expenditures of the Union Parishad. After annual statement used to be forwarded to the Upazilla Parishad and after it goes to Deputy Commissioner. Financial audits also determine whether; a. Financial information is presented in accordance with established or stated criteria b. The entity has adhered to specific financial compliance requirements, or c. The entity’s internal control structure over financial reporting and safeguard in assets is suitably designed and implemented to achieve the control objectives. Budgeting Process Traditional budgets are based on the organizational structure, more specifically, identification of those officers within the government who are held accountable for spending money against budgets such as Upozilla Nirbahi Officer (UNO) and people representative of local government. This feature of budgets applies whether budgets are highly aggregated or whether there is significant devolution of budgets. The organizational structure locates the budgets. Budgets tend also to focus on one year, the coming fiscal year of Union Parishad. This annual request embodies another common feature of budgets: the request for the coming year is justified in terms of marginal changes from the previous year’s budget. The essence of this feature of budgeting is not that budgets must always increase but that budgets are justified by marginal changes from previous years, which may, in principle, be decrements. The significant proportions of a local government’s income tend to consist of grants from other governments, including the national government, and taxation. Cash accounting for these kinds of income is useful and straightforward; recognition of receivables and payables might be useful but is also usually difficult. In sum, budgets of local finance are traditionally line-item, incremental requirements that reflect the Union Parishad financial structure. Being expressed in money terms, they are natural ways of requesting money. An accounting system of local finance recognizes goods and services ordered by the local government is called commitment accounting. In principle, an accounting system could be devised that recognizes goods and services ordered from the local government but such a system would be unlikely to be useful. The main purpose of commitment accounting is in budgetary control; indeed, one of its main difficulties is its relationship to financial reporting. Commitment accounting provides a more useful record of “spending” against a budget, for both the budget holder and those with higher responsibility for budgetary control, than either records of goods and services received (which are strictly unnecessary for commitment accounting), or of cash paid (which are necessary for all accounting systems). It records spending at the earlier point at which an official order is issued for the supply of goods or services, thereby recording a commitment by the budget holder and therefore by the local government to receive the goods or services in the stated quantity, at the stated price. Because commitment accounting depends on orders being issued, it applies only to parts of a local government budget, though it can relate to many small transactions: the parts to which it generally does not apply are employee expenses, financing expenses, and those running costs (such as gas, electricity, telephones) that are supplied without recurring orders (Table 1, 2 below). Tax collection Procedures Revenue collection is one of the main functions of local governments. Local governments collect funds from a variety of revenue sources, including fines, fees, taxes, licenses, permits, and special assessments. Revenues are received in a timely manner, credited to the proper fund, and deposited into the correct bank account as quickly as possible. In addition, governments should strive for high collection rates for all revenues owed and keep the payment-making process simple and easy for citizens. The Union Parishad prepare a valuation list of all buildings within the union through an assessor to be appointed for the purpose by the Union Parishad with prior approval of the relevant authority. Such an assessor may either be a member or any other suitable person. The prescribed authority has never insisted that the Union Parishad follows the correct procedures as rules in assessing the union rates. The present practice of taxing the union rate without any fixed economic basis leaves sufficient leverage for both under assessment and over assessment. The present practice tempts the Union Parishad leaders to under tax their friends, relatives and political supporters and overtax their opponents or political rivals. So, the Outcome is insufficient yields of revenue to the Union Parishad fund and intensification of village factional politics. But it’s a matter of fact that Union Parishad have lack of human power to collect taxes and people are not enthusiastic to pay taxes. The Union Parihads to levy seven types of taxes and rates in terms of a certain percentage of the annual valuation. That is union rate, taxes on hearth, lighting rate, drainage rate, conservancy rates, rates for provision of water supply and rates for the remuneration of village police. For assessing the other types of taxes, the Union Parishad is guided by the rates mentioned in the model tax
  4. 4. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 041 Triple A Res. J. Soc. Sci. Human. Table 1. Sylhet Sadar Upazilla Budget (2016-2017) Specification (Acquisition of Revenue Accounts) Taka Revenue 4,23,15,000 Donation ------------ Total Acquisition 4,23,1500 Without Revenue Expenditure 61,74,640 Revenue Surplus/Deficiency 3,61,40,360 Development Accounts Development Donation 3,54,00,000 (Surplus Revenue) 60,000,000 (Development) Constructing of Upazilla Building 30,00,000 Total Acquisition of Wealth 4,44,000,00 Without Development Expenditure 4,44,00,000 Total Budget Surplus/Deficiency 3,61,40,360 Source: Collected from Sylhet Sadar Upazilla, April 2017 Table 2. Khandigaon, TukerBazar and KhadimNagor Union’s proposed financial year (2016-2017) budget is given below Union Name Income (Taka) Expenditure(Taka) Khandigaon 5843915 584067 Tuker Bazar 7418000 7361620 Khadim Nagor 9590700 9296300 Source: Compiled with the information collected from Khandigaon Union, Tuker Bazar Union and Khadim Nagor Union. April 2017 schedule. The specific grants are given to the Union Parishad under three separate but similar types of programmes. These are; 1. Rural Works Programme (RWP) 2. Food for Works Programme (FFWP), and 3. Test Relief Programme (TRP). To obtain these funds, the Union Parishads are required to submit schemes to the Deputy Commissioner every year with complete specifications and project estimates in the prescribed. Besides, The Union Parishads (Ups) have three sources of revenue from central government: • Annual revenue budget which contributes to costs of salaries and honoraria. • 1% land transfer tax on land transfer within the union boundaries (a land transfer tax of 2% is collects and half of this now goes to the Ups. • The Annual Development Programme (ADP) block grant for Union and Upazilla development from the central budget via the ministry of local government. The government of Bangladesh has recently adopted measures to increase the revenue that flows to up by reducing the proportion of the revenue transferred –to- central government by Ups from 35% to 25% and increasing the lease value threshold at which a proportion of the lease revenue flows to Upazilla, rather than Union level. (Aminuzaman 2002:2014) (Table 3, 4 below). At the grass root level, development projects are undertaken and being implemented through depending on the guidelines given by the controlling or funding authority. In Bangladesh at UP level, usually four types of development projects are being undertaken and implemented now-a-days. METHODOLOGY AND FRAMEWORK The study has been conducted through survey and case study design. Moreover, in case where the population is too large to observe directly and the best option for collecting primary data. Through case study design a study directed at how decisions are made, the unit of analysis is decisions.it would like to select some samples areas which may represent whole of Bangladesh and it is easy to communication and easy to collect data for the fulfillment of the research objectives, the study has selected areas; Khadimnagar Union, khandigaon Union, and Tuker Bazaar Union under Sylhet Sadar Upazilla for the case study purpose. Population of the study is all the service recipients from local authorities. Specific number of population is unknown here. So, samples of eight hundred respondents have been selected purposively based purposive sampling. Service recipient have been identified who came during the
  5. 5. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 MD. Anwar Hossain 042 Table 3. Allocation for Local Government Institution (LGI) (Cr.TK) 2013-2014 Medium Term Projection 2014-2015 2015-2016 2016-2017 Union Parishad 160.00 165.00 178.00 192.46 Upazilla Parishad 368.20 460.00 311.17 666.47 Source: MTBF, Budget Speech and Bangladesh Economic Review (Various Years) Table 4. Development Projects Currently Undertaken at UP S. No. Types of Development Projects Funding Authority 1. ADP Funding Project Local Government Division 2. Local Governance Support Project (LGSP) Local Government Division in collaboration with WB, UNDP, UNCDF, DANIDA and EC 3. Relief and Rehabilitation Program (Social Safety-net Programs) Ministry of Food and Disaster Management 4. Direct Funding Program Local Government Division Source: Mohammad, 2010: 50 Table 5. Area Distribution of Respondents (Public Representatives) Union Number of Respondents Percent Valid Percent Cumulative Percent Tuker Bazar 13 26.0 26.0 26 Khandigaon 13 26.0 26.0 52 Khadim Nagor 13 26.0 26.0 78 Sadar Upazilla 11 22.0 22.0 100 Total 50.0 100.0 100.0 Source: Field Data, March ,2017 Table 6. Union Distribution of Respondents (Local Financial Consumers) Union Number of Respondents Percent Valid Percent Cumulative Percent Tuker Bazar 250 33.3 33.3 33.33 Khandigaon 250 33.3 33.3 66.66 Khadim Nagor 250 33.3 33.3 100 Total 750 100.0 100.0 Source: Field Data, March 2017 conduct of research. This study has been done based on the perceptions of 50 public representatives of Tuker Bazar, Khandigaon, Khadim Nagor and Sadar Upazilla and 750 local financial consumers of Tuker Bazar, Khandigaon and Khadim Nagor Union from 142431 inhabitants. The public representatives and local financial consumers have different characteristics with respect to local financial presentation as well as socio-economic surroundings. The local consumers are the pressure group and the local representatives are the influential group of local level Finance. Ensuring accountability and transparency at local level finance of Tuker Bazar, Khandigaon, Khadim Nagor under Sylhet Sadar Upazilla in this part by analyzing the variables from the respondents (public representatives and local financial consumers) opinion (table 5, 6). FINDINGS AND DISCUSSION Most of the respondents (90%) have idea about local sources of finance (table 7 below). Besides, other (6.0%) respondents have no knowledge about local source of finance and only (4%) respondents have no comment about idea about local sources of finance. In this study, regarding as that respondents have adequate knowledge about local sources of finance.
  6. 6. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 043 Triple A Res. J. Soc. Sci. Human. Table 7. Idea about Local Sources of Finance (Public Representatives) Idea about Local Sources of Finance Number of Respondents Percent Valid Percent Cumulative Percent Yes 45 90.0 90.0 90.0 No 3 6.0 6.0 96.0 No Comment 2 4.0 4.0 100.0 Total 50 100.0 100.0 Source: Field Data, March,2017 Table 8. Involvement of People’s Participation in UP Budgeting People’s Participation in Budgeting Number of Respondents Percent Valid Percent Cumulative Percent Yes 50 100.0 100.0 100.0 Source: Field Data, March 2017 Table 9. UP Disseminates Financial Information UP Disseminates Financial Information Number of Respondents Percent Valid Percent Cumulative percent Yes 47 94.0 94.0 94.0 No 2 4.0 4.0 98.0 No Comment 1 2.0 2.0 100.0 Total 50 100.0 100.0 Source: Field Data, March 2017 Table 10. Opinion about Audit held regularly Audit held out Regularly Number of Respondents Percent Valid Percent Cumulative percent Yes 48 96.0 96.0 96.0 No 2 4.0 4.0 100.0 Total 50 100.0 100.0 Source: Field Data, March 2017 All respondents (100%) think that involvement people’s participation in UP budgeting is satisfactory (table 8). Analyzing the above mentioned statistical data it can be said that involvement people’s participation in UP budgeting is adequate. The statistical information (table 9) represents the high possibility of it. Among the respondent’s majority has been said “yes” (94%) in questioning about UP disseminates financial information whereas 4% said no. Only one respondent opinion has “no comment” about it. The table (table 10) shows that Maximum (96%) respondents believe that audit held regularly at local level finance, whereas rest of them (4%) are not agreed with this. Analyzing the above mentioned statistical data it can be said that audit held regularly at local level finance. The statistical information (table 11) represents the high prospect of it. Among the respondent’s majority has been said “yes” (78.0%) in questioning about inspection held regularly at local level finance (22.0%) said no. Considering this sense, it can be said that inspection held regularly at local level finance According to table 12, maximum respondents think (96.0%) that UP has autonomy in its income and spending, where the small number of respondents are not agreed (4.0%) with this statement. Most of the respondents (76.4%) have no idea about local source of finance. Besides, other (23.1%) respondents have knowledge about local source of finance and only (0.5%) respondents have “no comment” about idea about local source of finance. In this study, regarding
  7. 7. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 MD. Anwar Hossain 044 Table 11. Opinion about Inspection Held Regularly Inspection Held Regularly Number of Respondents Percent Valid Percent Cumulative percent Yes 39 78.0 78.0 78.0 No 11 22.0 22.0 100.0 Total 50 100.0 100.0 Source: Field Data, March 2017 Table 12. Opinion about UP has Autonomy in Its Income and Spending Up has Autonomy in its Income and Spending Number of Respondents Percent Valid Percent Cumulative percent Yes 48 96.0 96.0 96.0 No 2 4.0 4.0 100.0 Total 50 100.0 100.0 Source: Field Data, March 2017 Table 13. Idea about Local Level Finance Idea about Local Level Finance Number of Respondents Percent Valid Percent Cumulative Percent Yes 173 23.1 23.1 23.1 No 573 76.4 76.4 99.5 No Comment 4 0.5 .5 100.0 Total 750 100.0 100.0 23.1 Source: Field Data, March 2017 Table 14. Opinion about People’s Participation in Financial Management People’s Participation in Financial Management Number of Respondents Percent Valid Percent Cumulative Percent Yes 133 17.7 17.7 17.7 No 603 80.4 80.4 98.1 No Comment 14 1.9 1.9 100.0 Total 750 100.0 100.0 Source: Field Data, March 2017 as that respondents have no adequate knowledge about local source of finance (table 13). Maximum respondents (80.4%) think that involvement people’s participation in financial management is not satisfactory whereas (17.7%) respondents said satisfactory. Only (1.9%) respondents have comment on medium about this. Analyzing the above mentioned statistical data it can be said that involvement of people’s participation in financial management is not adequate (table 14). Table 15 below shows that maximum (81.2%) respondents have no people’s participation in budgeting, whereas (17.2%) “yes” with people’s participation in budgeting. Only (1.6%) respondents have “no comment” about this. Regarding this sense, it can be said that people participation in budgeting is not adequate. UP has deficient for disseminating financial information. The statistical information (table 16 below) represents the high possibility of it. Among the respondent’s majority has been said “no” (82.3%) in questioning about UP disseminates financial information whereas (14.9%)said no. Only (2.8%) respondent’s opinions have “no comment “on the subject. Most of the respondents (58.8%) agreed with problems occur in auditing and inspection of local level finance. Besides, other (29.3%) respondents do not agree with this statement, and only (11.9%) respondents have “no comment” about problems occur in auditing and inspection
  8. 8. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 045 Triple A Res. J. Soc. Sci. Human. Table 15. Opinion about People’s Participation in Budgeting People’s Participation in Budgeting Number of Respondents Percent Valid Percent Cumulative Percent Yes 129 17.2 17.2 17.2 No 609 81.2 81.2 98.4 No Comment 12 1.6 1.6 100.0 Total 750 100.0 100.0 Source: Field Data, March 2017 Table 16. Opinion about Disseminate Financial Information of Union Parishad Disseminate Financial Information of Union Parishad Number of Respondents Percent Valid Percent Cumulative Percent Yes 112 14.9 14.9 14.9 No 617 82.3 82.3 97.2 No Comment 21 2.8 2.8 100.0 Total 750 100.0 100.0 Source: Field Data, March,2017 Table 17. Opinion about Problems in Auditing and Inspection System of Local level finance Problems in Auditing and Inspection system of Local Level Finance Number of Respondents Percent Valid Percent Cumulative Percent Yes 441 58.8 58.8 58.8 No 220 29.3 29.3 88.1 No Comment 89 11.9 11.9 100.0 Total 750 100.0 100.0 Source: Field Data, March 2017 Table 18. Opinion on Idea about Different Committees of Union Parishad in Development Activities Idea about the Development Committees of Union Parishad Number of Respondents Percent Valid Percent Cumulative Percent Yes 54 7.2 7.2 7.2 No 655 87.3 87.3 94.5 No Comment 41 5.5 5.5 100.0 Total 750 100.0 100.0 Source: Field Data, March 2017 of UP. In this study, considering this sense it can be said that problems have effect in auditing and inspection of local level finance (table 17). People have no idea about the development Committees of Union Parishad. The statistical information (table 18) represents the high probability of it. Among the respondent’s majority respondents said “no” (87.3%) in questioning about idea about development committees said “yes” (7.2%). Only (5.5%) respondents have comment about this. Considering this sense, it can be said that people have no participation in development committee or motionless development committee of Union Parishad. Besides, case of disseminating financial information of Union Parishad:Karim Moral, age 45, a farmer of Khadimnagor under sadar upazilla in sylhet district says: “We do not get financial information of Union Parishad . Chairman and member panic about disseminating financial information. They think that if people know about financial information and general people raised questions against them. General people do not know current financial
  9. 9. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 MD. Anwar Hossain 046 information of Union Parishad. Disseminating financial information system of UP is based on traditional system” (Interview 1, April 2017). Moreover, Rahman, Kabir and Razzaque (2005; Pp19) prepared a report for the World Bank, examining the level of civic participation in sub-national budgeting in Bangladesh. They concluded “The budget-making process in Bangladesh is still very bureaucratic and non- transparent. Yet the role of the elected representatives is very limited in prioritizing the development projects/programmes. As such the budgeting tends to be incremental, often heavily pulled by political and other kinds of lobbyists. The local level budgeting is even more non-democratic. It is fully dependent on the whims of central budget-makers. The resource generated from within the jurisdiction of local government is also very limited. Helal Ahmed, age 38, a business man of Khadim Nagor Union Under Sadar Upazilla in Sylhet District says: “We do not see people participation in Union Parishad Budget and no general people involvement in budget. People do not know when budget is declared and when it is sanctioned. It is totally unknown to general people. Chairman and member call only local elite people and some political people of UP. Amount of budget is totally unknown to general people. Chairman and members of UP decides what will be next year budget. They ignore general people opinion related to budget. Actually, chairman and members of UP do not want that general people’s participation in budget” (Interview 2, April 2017). Case of People Participation in Union Parishad Project Motin Mia, age 35, a business man of Tuker Bazar under Sadar Upazilla in Sylhet District says “There have no people participation in UP project and chairman appoint some political people involve in project. Some people gain profit in this project and no mass people involve in Union Parishad project” (Interview 3, April 2017). All the Chairmen and Members are more interested in the project implementation committee (PIC) or other project committees, most of the standing committee’s activities are not related with monetary matters, so the members are not much interested in the activities of those committees. People participation in Budgeting is not satisfactory. Many development respondent’s opinion that LGIs (Local Government Institutions) do not promote participation. The institutional arrangements of those institutions hardly encourage popular participation in the decision-making process. Case of Development Committee in Union Parishad:Saleh Ahmed, age 33, a shop owner of Tuker Bazar Union under Sadar Upazila in Sylhet district says: “We do not know how many standing committees are there and what their duties are, but we see sometimes some political people involved in Union Parishad Project Commitee . I think village “matabbar” people and some political leader give answer that they have heard about UP Standing Committee. He says general people do not know what no. of standing committees of Union Parishad and are all those committees necessary for an effective Union Perished”. In our union general people mention it pocket committee not development committee (Interview 4, April 2017). All the Chairmen and Members are more interested in the project implementation committee (PIC) or other project committees, most of the standing committee’s activities are not related with monetary matters, so the members are not much interested in the activities of those committees. People participation in Budgeting is not satisfactory. Many development respondent’s opinion that LGIs (Local Government Institutions) do not promote participation. The institutional arrangements of those institutions hardly encourage popular participation in the decision-making process. Discrepancies in the accounting records, such as transactions not completely, not timely, or improperly recorded; last minute adjustments significantly affecting the financial statements; inadequate authorizations; tips or complaints. Conflicting or missing evidence, such as missing documents; unexplained items on reconciliations; inconsistent, vague, or implausible responses to questions; differences from confirmations of balances, difficult or unusual relationships between auditor and audit, such as denial of access to information or unwillingness to cooperate, undue time pressure, delays in providing requested information, unwillingness to address identified weaknesses in internal control of local level finance. Case of Problem in Auditing and Inspection system of Local Level Finance: Shimul Biswas, age 30, a grocer of Khandigaon Union under Sadar Upazilla in Sylhet District says: “There has quandary in auditing and inspection system of local level finance. In Union Parishad have a lot of discrepancy in auditing and inspection system. Auditing and inspection is not held regularly. General people is not involved in auditing and inspection system. Auditing and inspection reports are not published” (Interview 5, April 2017). Case of monitoring mechanism of Local Level Finance Babul Mia, age 37, a village doctor of Khandigaon Union says: “The present monitoring mechanism of local level finance is not satisfactory and they are not able to treat local finance monitoring in right way what are people expected. It is totally unknown to people. The coordinating meeting is not regular basis to monitor local level finance. In some cases, only chairman and some selected member monitor local level finance. On the other hand, lack of training of monitoring local level finance, chairman and members are not properly monitoring it” (Interview 6, April 2017). CONCLUSION Developing countries like Bangladesh must consider the repercussions of the way in which power is distributed and exercised along with local financial policy. For many reasons, corruption is minimized when transparency of the
  10. 10. Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018 047 Triple A Res. J. Soc. Sci. Human. local financial system is maximized, yet when decisions are not made locally, local beneficiaries have difficulty understanding how and why the actual local financial decisions were reached. Thus, central government must weigh the efficiencies that can come from a centralized national financial system against the loss of accountability and legitimacy that may result from opaque decision- making structures at the local level finance. The most decentralized financial structural design shifts power to the local levels of government and their line staff. By fragmenting authority, decentralization is often seen as one of the best ways to increase intergovernmental competition, strengthen checks and balances, increase accountability by responding to local needs, and possibly reduce the role of the state in general. In study area, it was found that the challenges regarding local financial issues are corruption, lack of people participation in project and budget, poor idea about local level finance and its mechanism, lack of development committee, UP does not disseminate financial information, shortage of human power , irregular auditing and inspection system, lack of trained personnel, traditional local financial system, political syndicate among civil society, lack of digital financial system , not have of women members participation in standing committee and project at local level finance. For effective local financial systems different development of UP should lively work and general people should involve in this standing committee. Local official should supervise the budgetary management of those reporting to them. Full stores records should be maintained of orders, receipts, issues, returns, and write-offs. Define the methods to be used in appointing a chief auditor and individual auditors; Make clear the qualities and professionalism required for the internal auditors. Preparation of a comprehensive Union Plan and inclusion of inter-ward development projects after identification and prioritization REFERENCES Ahmed S (2014). Public Finance and Urban Development in Bangladesh. Bangladesh Economist Forum, Dhaka Analysis of Fiscal Stress in New York State’s Cities (2003). Available at http://www.osc.state.ny.us/localgov/pubs/research/citie sfiscalstress.pdf. Pp7. The International City/County Management Association (ICMA) (2003). The model on which this analysis is based is taken from “Evaluating Financial Condition: A Handbook for Local Government”. Das DK (2003). Perspective Report on Revenue Mobilization of Union Parishads in Bangladesh, Dhaka: Ministry of Local Government, Rural Development and Co-operatives. Fox WF, Menon B (2008). Decentralization in Bangladesh: Change has been Illusive. International Studies Program Working Pape. Atlanta: Andrew Young School of Policy Studies, Georgia State University. Pp08-29. Ministry of Finance, Medium Term Budget Framework MTBF (2017). Government of Bangladesh. Mohammad NS (2010). People’s Participation in Development Projects at Grassroot Level: A Case Study of Alampur and Jagannathpur Union Parishad, North South University. Pp1-10. Kabir M (2015). Mapping of Fiscal Follow and Local Government Financing in Bangladesh, Brand Resources, Dhaka, Pp33-35. Kim HY (2004). Local Tax Financing in the Nordic Countries, Oslo, Norway. Retrieved from: http//www.adb.org/Documents/Booksd/Local govt. finance on 3rd October 2017. Pp1-20. Quigly MJ (2008). Local Public Finance, Institute of Business and Economic Research University of California, Berkeley, Pp1-6. Salahuddin A (2002). Defining the Criteria of Local Government Contributions for Qualifying the Receipt of National and International Funding. USAID, Democratic Watch,RTI, DLGP,Dhaka. Available at http//:www.LG.fund.com. Pp4.

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