This document provides an overview of local government in Ghana. It discusses key concepts like decentralization and its forms. It describes the structure of Ghana's local government system including regional coordinating councils and metropolitan, municipal and district assemblies. It also outlines the functions, powers, and funding sources of MMDAs, including the District Assembly Common Fund. Finally, it discusses local government budgeting, accounting, and financial reporting practices in Ghana.

1. Local Government
Accounting and Finance
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2. Learning Objectives
• Explain the concept of Decentralisation
• Provide an overview of developments of the local government of
Ghana
• Describe purpose and the structure of the Ghanaian local
government
• Outline the functions and funding sources of MMDAs
• State and explain the budgeting and accounting practices of
MMDAs
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3. Concept of Decentralisation
• Decentralization is the process of redistributing or dispersing
functions, powers, people or things away from a central location or
authority.
• In government, decentralisation refers to the transfer of power,
responsibilities, functions and resources from the central government
to the local people through the local authorities.
• Decentralization, or decentralizing governance, refers to the
restructuring or reorganization of authority so that there is a system of
co-responsibility between institutions of governance at the central,
regional and local levels according to the principle of subsidiarity, thus
increasing the overall quality and effectiveness of the system of
governance, while increasing the authority and capacities of sub-
national levels.
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4. Forms of Decentralisation?
• The forms are political, administration, fiscal and market
decentralisation.
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5. Political decentralisation
• Political decentralization aims to give citizens or their elected
representatives more power.
• It involves giving citizens, or their representatives, more influence in
the formulation and implementation of laws and policies.
• It is stronger when the local citizens are allowed to elect their own
leaders who will be accountable to them.
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6. Administrative decentralisation
• It involves giving the local people administrative powers to make
decision without recourse to the central government?
• Three forms of administrative decentralisation:
• De-concentration, the weakest form of decentralization, shifts responsibility for
decision-making, finance and implementation of certain public functions from
officials of central governments to those in existing districts or, if necessary, new
ones under direct control of the central government.
• Delegation passes down responsibility for decision-making, finance and
implementation of certain public functions to semi-autonomous organizations
not wholly controlled by the central government, but ultimately accountable to
it.
• Devolution transfers all responsibility for decision-making, finance and
implementation of certain public functions to the sub-national level, such as a
regional, local, or state government.
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7. Fiscal decentralisation
• Fiscal decentralization means decentralizing revenue raising and/or
expenditure of moneys to a lower level of government while
maintaining financial responsibility.
• Fiscal decentralization can be achieved through user fees, user
participation through monetary or labour contributions, expansion of
local property or sales taxes, intergovernmental transfers of central
government tax monies to local governments through transfer
payments or grants, and authorization of municipal borrowing with
national government loan guarantees.
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8. Economic Market Decentralisation
• Economic decentralization can be done through privatization of public
owned functions and businesses.
• It also is done through deregulation, the abolition of restrictions on
businesses competing with government services, for example, postal
services, schools, garbage collection.
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9. Reasons for decentralized government
• Decentralization is often linked to Concepts of
• participation in decision-making,
• democracy,
• equality and liberty from higher authority.
• Decentralization is prompted because
• It enhances the democratic voice.
• It lead to local efficiency, equity and development.
• It increases involvement of local jurisdictions and civil society in the
management of their affairs, with new forms of participation, consultation,
and partnerships.
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10. Reasons for decentralisation in government
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11. Barriers to Decentralisation
• Barriers to decentralization include
• Weak local administrative or technical capacity may result in inefficient or
ineffective services;
• Inadequate financial resources may be made available to perform new local
responsibilities, especially in the start-up phase when they are most needed;
• Inequitable distribution of resources may result;
• Danger of complexity of national policy coordination;
• it may allow local elites to capture functions;
• Higher enforcement costs and conflict for resources if there is no higher level of
authority.
• High cost decentralisation
• Possibility that corrupt local elites can capture regional or local power centres.
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12. Overview of Local Government
• The current form of local government administration was spurred by
efforts of previous governments to among other things,
• Bring government closer to the governed and
• improve public administration by empowering local authorities to
be the planning and decision-making bodies
• enhance the capacity of government to achieve local participation.
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13.  Article 240 of the 1992 Constitution provides for the establishment of
system of local government and administration which should be
decentralized.
 Article 240 of the 1992 Constitution stipulates that Ghana shall have:
• a system of local government and administration which shall be decentralized;
• in that the appropriate laws are enacted to ensure that functions, powers,
responsibilities and resources are all times transferred from the Central
Government to local government units in a coordinated manner.
 The Local Government Act 1993, Act 462 was promulgated to ensure
that the functions, powers, responsibilities and resources are all times
transferred from the central government to the local governments in a
coordinated manner.
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14. • The new Act (Local Governance Act, 2016, Act 936) seeks to provide for local
governance in accordance with the Constitution;
• to establish a Local Government Service;
• to provide for the establishment and administration of the District Assemblies
Common Fund;
• to provide for a National Development Planning System;
• to define and regulate planning procedures of District Assemblies;
• to co-ordinate, facilitate, monitor and supervise internal audit activities within
District Assemblies and
• for related matters
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15. Creation/establishment of Assemblies
• The Act 936 vested the power to declare an area as district,
municipality, metropolitan in the President.
• The president exercises this power in consultation with the Electoral
Commission because the creation of an assembly may affect the
alignment of existing constituency.
• Factors considered in the declaration:
• Population (75,000 = DA; 95,000 = MuA and 250,000 = MeA)
• Geographical contiguity and economic viability.
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16. • Upon declaration, the MLGD introduces a Legislative Instrument (L.I)
to parliament to incorporate the assemblies.
• The L.I contains among others:
• Name of the assembly and area of authority
• Number of persons to be elected to the assembly
• Jurisdictions, functions, powers and responsibilities
• Place where the principal offices are situated
• Other matters.
• The passage of the L.I complete the creation process and the
assembly becomes a corporate entity with rights and responsibilities
under the laws.
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17. Structure of Ghana’s Local Government System
• It generally consists of the following:
• Regional Coordinating Council
• Metropolitan Assembly
• Municipal or District Assembly
• Urban or Town or Area or Zonal Council
• Unit Committee
• The Regional Coordinating Councils represent the highest level of
• Local Government in Ghana and are established in each of the 10
• regions of the country
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19. Regions(RCCs) Metropolitan
Assembly
Municipal
Assembly
District Assembly Total MMDAs
Ashanti 1 8 21 30
Brong Ahafo 8 19 27
Central 1 7 12 20
Eastern 10 16 26
Northern 1 2 23 26
Upper East 3 10 13
Upper West 1 10 11
Volta 5 20 25
Western 1 3 18 22
Greater Accra 2 9 5 16
Total 6 56 154 216
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20. Composition of General Assembly
• Persons eligible to represent in the assembly include:
• The chief executive (DCE/MCE/Mayor) appointed by the president
subject to confirmation by at least 2/3 of members
• One representation of each electoral area elected in adult suffrage
• The MP/MPs whose constituency fall within the jurisdiction of
assembly, but don’t have voting rights
• Persons elected by the president not exceeding 30% of total
members.
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21. The BiG Debate
• Should MDCEs be appointed or elected in Ghana?
Just for
20 minutes,
Please!!!!
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22. Powers and Responsibilities of MMDAs
• Under the Act 936, MMDA is the highest
administrative, deliberative and political authority in
the area of jurisdiction.
• The assembly is performs the following functions,
among others:
• To ensure the overall development of the district
• To effectively mobilize resources for the overall
development of the district
• To promote and support any productive district activities
and development
• To develop environment and human settlements in the
area
• See details in Sections 12-13 of LGA, 2016, Act 936
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23. Central –local government relationship
• Local government (MMDAs) could be regarded as subsidiaries of the
central government.
• The central government (as the parent) provides rules and procedures,
influences administration and provides resources to supplement the
resources of the MMDAs (subsidiaries).
• Intergovernmental financial transfers include
• Salaries payment for local government workers, including MMDCEs
• District assembly common fund/MPs fund
• District development fund (DDF)
• Urban sanitation grants
• Ceded revenues
• HIPC fund reliefs
• etc
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24. Reasons for Central-local relationship
• Intergovernmental links are necessary in order to:
• Ensure that local services reflects national priorities and policies and are provided
on comparable standard basis
• Ensure that MMDAs spending are compatible with national economic objective
• Ensure harmony of activities among the MMDAs themselves.
• Safeguard the interest of the vulnerable minority groups
• Encourage and maintain local democracy
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25. Local government
Finance and Accounting
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26. Local government budgeting
• The MMDAs are granted the authority to prepare and approve their own
budget without recourse to parliament.
• The budget process of MMDAs is therefore different from that of the MDAs,
even though similar.
• The budgeting process is guided by the budget framework policy issued by the
MOF to the Chief Executive.
• The budget cycle in the assemblies is guided by legislations.
• Examples: LGA, 2016 (Act936), National Development Planning Systems Act
1994 (Act 455), DACF Act 1993 (Act 455), PFM/FAR, Audit Service Act, PPA,
LGSA, IAAA, etc.
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27. Budget process
• The process and procedures involved are:
• The chief executive issue call for estimates to the heads of the various department
in the assembly requesting them to make their expenditure and revenue
estimates for the year.
• The heads prepare their estimates and submit them to the budget committees
through the budget unit.
• The budget committee prepares a draft and transmit it to the Finance and
Administration sub-committee for review.
• The final budget is prepared based on the reviews along with a fee-fixing proposal
• The budget and the fee-fixing proposal is laid before the general assembly for
approval
• The assembly considers the budget and approves it before the end of the current
financial year.
• The fee-fixing resolution will also be passed by the assembly to give approval for
revenue mobilization.
• Copies of the approved budget is submitted to the RCC, MLGD and the MOF02/05/2017 SNYS 27

28. Composite Budget
• The latest development in the local government budgeting process is
the composite budgeting
• A Composite Budget is an aggregation of projected revenues and
expenditures of the Departments and institutions of the MMDAs
• The process was accelerated in 2011, when MOFEP set up National and
Regional Technical Working groups to coordinate, monitor and provide
backstopping support to the Districts.
• This led to the development of Composite Budget Manual to facilitate
and guide preparation, approval, execution, monitoring and evaluation
of composite budget at the local level
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29. Composite Budget
• A Composite Budget seeks to among others,
• Harmonize the budget of all decentralized departments and bring
them under the ambit of the Assemblies’ budgeting process.
• Accelerate fiscal decentralization reforms
• Provide comprehensive picture of the revenue and expenditure
requirements of assemblies
• Improve transparency and accountability in the management of
public funds at the District level
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30. • The main objectives are to ensure:
• cost effectiveness in the planning and implementation of district
programmes;
• holistic development of the MMDAs
• transparency in the use of resources;
• effective planning and utilization of resources;
• a unified approach for district and national budgeting system;
• uniform system of monitoring, evaluation and reporting system;
and
• determination of the total inflow and outflow of resources
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31. Structure of the Annual Composite Budget Cycle
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34. Local government revenues
• The MMDAs are tasked the Act 936 to strategized to
mobilize financial resources for the development of
the district.
• These financial resources may be obtained from
external sources( like the intergovernmental transfers
and donations) and internally generated fund (IGF)
• For the purposes of financial reporting the revenues
of MMDAs are classified as rates, land revenue, fees
and fines, Licenses, rent , investment income, grants
and general expenses,
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35. Sources of Revenues
• Rates
• Are compulsory levy imposed on all rateable persons and properties within the
jurisdiction of the assembly.
• There are three types of rates
• Basic rate
• Property rate
• Special rate
• Land revenues
• These are revenues resulting fro the use of land resources.
• Land revenue includes:
• Royalties for gravel or sand wining
• Share of stool land revenue.
• The MMDAS are entitled to 55% of the land revenues resulting for royalties,
leases, etc.
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36. Sources (cont)
• Fees and fines include:
• Lorry park fees
• Sign post fees
• Market toll
• Slaughter house fees
• Dressing station
• Conservancy
• Cattle kraal
• Marriage and divorce
• Birth and death
• Building permits
• Court fines
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37. Sources (cont)
• Licenses
• There several activities that require assemblies’ approval
before it can be undertaken legally.
• Examples include
• Palm wine sellers
• Hawkers
• Chop bars
• Charcoal dealers etc
• Rent income
• This may come from:
• Market store
• Residential accommodation
• Rental of office space etc
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38. Sources (cont)
• Investment income
• May be derived from:
• Hiring of equipment and facilities
• Tractor services
• Gains from business ventures
• Interest on deposits
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39. Sources (cont)
• Grants
• It represents all external funding to the assembly in the form of
intergovernmental transfers and donations.
• Grants include:
• Share of district assembly common fund
• Salaried post subvention
• District Development Fund
• Share of HIPC reliefs
• Other grants-in-aid
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40. Expenditures
• Assembly are granted to spend per their budget
• Expenditures of MMDAs are classified in a similar manner to MDAS.
• Expenditures may be classified based GIFMIS.
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41. Financial Reporting
• MMDAs are required to keep proper books of accounts and to prepare
financial statements annually which should be audited by the AG.
• The financial statement of MMDAs include
• Receipt and Payment Statement
• Revenue and Expenditure Statement
• Statement of Financial Position
• Cash flow statement
• Notes and schedules
• This accounts are prepared on modified cash or modified accrual basis.
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42. District Assembly Common Fund
• It established by the District Assembly Common Fund Act 1993, (Act 455)
under Article 242.
• Purpose is to provide resources to support the developmental activities of
the local government.
• It a fund created out of the consolidated fund to channel resources from the
central government to the local governments for development.
• The District Assemblies’ Common Fund (DACF) is a pool of resources created
under section 252 of the 1992 constitution of Ghana.
• It is a minimum of 5% of the national revenue set aside to be shared among
all District Assemblies in Ghana with a formula approved by Parliament.
• The fund is a Development Fund which enables the use of the nation’s
wealth throughout Ghana to the benefit of all citizens.
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43. • Purpose of the DACF include:
• The Fund is to ensure equitable distribution of the national resources for the
development in every part of Ghana.
• To Improve housing Schemes.
• To support sanitation management
• It is to strengthen decentralization, and to promote Sustainable self-help
development communities.
• To improve upon primary health care delivery in all part of Ghana
• It is to improve the country’s educational facilities, and to ensure quality education
• The Fund support Community policing.
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44. • Sources of moneys into the fund
• 7.5% of Total tax revenue is transferred quarterly into the fund.
• Income from investment of the fund
• Donations and Grants
• Expenditures charged on the DACF
• Disbursement to MMDAs/MPs
• Disbursement to RCCs
• Direct expenditures on behalf of MMDAs (reserves)
• Administrative expenses directly related to fund administration( audit fee,
bank charges etc)
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45. • Approved areas of spending the share of DACF by the MMDAs:
• Economic Ventures ( Energy, Markets, Agriculture, Services roads etc.
• Social services (Education, health, Water, Sports and Recreation, Self help
projects ,Educational Activities e.t.c)
• Administration (capacity building of DA staff and Assembly members,
Accommodation, office Equipment etc.
• Environment (Sanitation, Disaster management)
• MPs common fund
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46. • Administration of the DACF
• The fund is administered by the DACF Administrator appointed by the
president.
• The DACF Administrator has the following mandatory functions:
• Propose formula annually for the allocation and distribution of the common fund to the
MMDAs
• Allocate and distribute the common fund quarterly based on the approved formula to the
various MMDAs
• Report in writing to the MOF on how the fund was distributed and utilized by the various
MMDAs; and
• Perform any other functions required by the President of the Republic.
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47. Formula for distribution
• The general principle of sharing the DACF is to uphold fairness and equity.
• Factors considered in the formula are:
• Need factor- basic needs of the assembly
• Service pressure- population is usually used
• Responsiveness – revenue mobilization efforts of the assembly is mostly used
• Equalizing factor – ensure guaranteed minimum equal amount across board
• Reserved fund
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48. Proxies/variables used in the formula
• Certain variables or proxies are used in the computation
Factors Proxies/variables
Need factor  Health ( health facility/population ratio; Health professional/population)
 Education ( education facilities/pop ratio; Trained teacher/ pupil ratio)
 Roads ( Tarred road coverage)
 Water (water coverage)
Responsiveness  Revenue improvement
Service Pressure  Population density
Equalizing  Equal weight
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49. Sources of Data for the computations
• Data used for the computation should be obtained from official
sources as follows:
Data required Source
Population Census -Statistical service
Education ( education facility, pupil and trained
teachers)
Ministry of Education
Health (Health facilities, number of doctors and
nurses)
Ministry of Health
Internally generated revenue CAG- local government accounts unit
Water coverage GWC and Community Water and Sanitation
Agency
Tarred Road coverage (urban and feeder roads) Department of Unban and Feeder roads
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50. Weighted factors
• The indicators of the various factors are combined by weights to arrive at
the share proportion of each MMDAs.
• 2014 weighting of factor are
Factor Weight (%)
Need Factor
( health = 17%; Education=18%; Road =5% and
Water = 5%)
45
Equalizing / equality 45
Responsiveness 6
Service pressure 4
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51. An example
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52. Stakeholders in the DACF Operations
• There are number of important stakeholders in operating the DACF and
this include:
Stakeholders Responsibility
Ministry of Finance/ MLGRD  Guidelines for the preparation of development budgets of the MMDAs.
 MOF also issue release instructions to CAG
Bank of Ghana  Banker of the DACF and transfers fund to bank account of MMDAs upon
advise of DACFA
Control and Accountant General  Facilitates the release of the funds into DACF accounts at BOG
Development partners (DPs)  Provision of technical and financial support to MMDA BOG
Parliament  Approval of the formula
RCCs  Help to monitor and evaluate the use of the DACF
MMDAs  Prepare supplementary development budgets
 Submit reports on the use of the fund
 Monitor DACF projects.
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53. • Benefits of the DACF include;
• The fund aims at creating jobs for all through programmes such as cottage
industries.
• It seeks to get more people gain access to improve shelter through housing.
• Through the fund, health facilities are expanded and improved to make health
delivery accessible to many people
• Through the fund numerous school buildings and structures have been
constructed for the increasing needs of the population.
• The fund encourages and supports communities that make effort to initiate
their own development projects (Community Initiated Programme).
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54. • Challenges of the Administration of the DACF:
• Delay in the release and disbursement of the fund to the MMDAs
• Government interference in the allocation and disbursement of
the fund
• Inadequacy of the funds
• Misappropriation and financial malpractices at the MMDAs level
• Over reliance on the fund by some district assemblies. Retarding
innovative financing .
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