CHAPTER ONE

INTRODUCTION

This chapter looks at the background to the study, problem statement, objectives of the study, research questions, significance of the study, scope and limitations of the study and the organization of the study.

1.1 BACKGROUND TO THE STUDY

Central governments over the world have made human and environmental development their primary objective and have therefore used decentralization as a method of sharing development responsibilities with para-state agencies such as the local authorities. Rodinell (1981) defines decentralization as the transfer of authority to plan , make decisions and manage public functions from a higher level of government to individual, organization or agency at lower level.Aryee (1999) identifies four forms of decentralization. These are administrative, economic, political and fiscal.

Local government in Ghana, especially Metropolitan, Municipal and District Assemblies (MMDAs) were established with the sole aim of generating good contacts with the citizens and to bring decision making to the level where development generally takes place. MMDAs were also created to help strengthen the democratic process and lay the basis for the upsurge of autonomous institutions of governance within the structure of the nation-state. According to Aryee and Amponsah (2003), the District Assemblies have added potential advantage such as spreading development skills throughout the society.

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To ensure development, the government of Ghana in 1988 promulgated a local government law, Provisional National Defence Council (PNDC) Law 207 to establish one hundred and ten (110) local authorities. Section 241 of the 1992 constitution and local Government Act 462 (1993) have been the basis for the adoption of the current decentralization programme in Ghana.

There are massive responsibilities, spelt out in Act 462 specifying the functions, and responsibilities of the District Assemblies in Ghana. The Local Government Act 462 (1993) Section 10, sub -section 3 states that the districts assemblies shall be responsible for the overall development of their district and preparation and submission of development plans.

MMDAs are charged by the local government law with physical development responsibilities such as to:

1.      ensure legal arbitration;

2.      register birth, death marriage and divorce;

3.      give building permits to ensure proper spatial development;

4.      build schools, provide books and furniture;

5.      maintain law and order;

6.      establish and maintain parks and gardens;

7.      provide street lights;

8.      provide health, sanitation and waste management service;

9.      provide social services;

10.  provide fire fighting services;

11.  provide markets;

( Local Government Act, Act 462 (1993)

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MMDAs are charged by various enactments including the 1992 Constitution to ensure physical transformation of the various local areas and stimulate socio-economic activities and development so as to change civic inertia, poverty and illiteracy to enhance equity, efficiency, effectiveness and economy in their entrepreneurship. These functions of the MMDAs cannot be achieved without adequate financial resources to support them. Inadequate financial resources can undermine the effective implementation of developmental projects in the districts.It is against this background that the new local government system has made provision for the financing of the district.

Fiscal decentralization is the transfer of responsibilities, power and resources to lower level public authority to mobilize funds for development that is autonomous and fully independent from the devolving authority when narrowed down to devolution. Local authorities are given responsibilities and financial means within the national level determining the scope and quality of services to be provided and amount of funds needed to deliver these services.

Kessey and Diaw (2002) called for vigorous revenue mobilization drive if the MMDAs are to perform better. They mention that the effectiveness of revenue mobilization depends on factors such as fiscal policy, revenue administration monitoring operations and performance assessments. Unfortunately many MMDAs do not generate enough revenue. The reasons for their inability to mobilize enough revenue are numerous. To mention a few Kessey and Diaw (ibid) list corrupt practices, poor mobilization strategies, poor budget control and poor financial management as the major reasons.

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Prudent financial management refers to how wisely resources are mobilized and managed effectively and efficiently. Financial management is therefore important aspect of public administration of every nation and it is one of the elements that make government effective. It involves financial forecasting, financial planning and budgeting, financial reporting and auditing. Sound financial management is one of the important complements of effective management practices which seek to enhance the socio-economic development of local authorities in Ghana.

Marshall and