Vertical and bottom-up control of municipalities’ finances

Vertical and bottom-up control of municipalities’ finances

1. 
   Compared to most countries in the subregion, the central government’s tutelle (control) of the Cape Verdean municipalities is relatively light. According to the Chapter VI of the Municipality Statute (1995), the central government controls administrative, patrimonial, and financial management of the municipalities insofar as they comply with the law of the land. The only municipal acts that need government approval to be valid are these whose goal is to launch a municipal tax and adicionais (additionals). Beyond the legality control (which can be exercised by inspection), the municipalities have a duty to send the following information to the government:
   

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  Municipal “management” accounts.
  

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  Minutes of the municipal meetings.
  
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  Municipal budget.
  
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  Activity plan.
  

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  Activity report.
  
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  Twinning agreements.
  
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  Report on the state of the municipal administration.
  

71. 
    The central government does not prescribe any type of expenditures or share thereof with which municipalities need comply. This is a welcome development for local autonomy but restricts the initial control from the central government on local entities that may not yet have the capacity to single-handedly manage their finances––some countries for instance indicate a ratio of recurrent to capital expenditures or mandate some specific expenditure in strategic sectors.
    
72. 
    Both institutions in charge of ex-post control of municipal finances, the IGF (General Finance Inspectorate, under Ministry of Finance) and the TdC (Court of Accounts, or external audit institution), find it difficult to fulfill their mandates. One major constraint of both institutions is the insufficient number of qualified staff and their insufficient operating budgets. This is aggravated by the territorial discontinuity of the country, which increases considerably the inspection costs.
    
73. 
    According to the law, the IGF inspects municipalities. Irregularities are recorded in a report transmitted first to the municipality, so that it can supply additional information or contest parts of the report. Once the municipality has been given a chance to comment, the final report is transmitted to the Minister of Finance, who may send it to the TdC for further action.
    
74. 
    In preparation for the 2008 local elections, the IGF fielded inspections in all municipalities in 2007 so that newly elected officials would find a clean slate. Reports for these inspections are not yet available. Interviews with the IGF provided some information on various cases of abuses encountered. These included abuses in land sales in “tourist zones,” gap between contracts-programs objectives and actual expenditures, and payments not engaged or planned in the budget.
    
75. 
    The TdC certifies the legality and conformity of municipalities’ public accounts and transmits accounts to the Parliament. However, its limited contribution to and impact on the control of municipal finances is a real problem. The last “management accounts” analyzed by the TdC date from 2000, and analysis was done for only 1 municipality (Sal) of 17. This low rate is mainly due to the financial and staffing constraints of the TdC. It should be noted that municipalities do not all transmit their accounts to the TdC in time, Hence, by the end of October 2007, the TdC had received “management accounts” for 2006 from only 10 municipalities, and 4 municipalities still had not transmitted their accounts for 2005. Finally, the impact of the control is rather limited since audits are made available after the end of the electoral mandate for which budgets were being audited.
    
76. 
    One specific concern of the TdC is the poor monitoring of human resources in the municipalities. As seen in table 9 (municipal management capacity), many municipalities were not able to transmit the requested information for their staff during the human resources census. In the sample, it can be up to 24 percent of the staff for whom no detailed information was made available. The major concerns on this front are: absent or outdated personnel files, absence of security of the process, absence of control of new entries and departures, and absence of TdC approval of some of the human resources processes for which its approval is compulsory.
    

Accountability to Citizens

77. 
    The performance of local governments generally is rated positively by the population (Afrobarometer 2005) but with interesting variations. If road maintenance and sanitation receive a good appreciation (respectively 57 percent and 60 percent of respondents approve the ways in which their local governments deal with these issues), tax collection and use of local resources fare much lower.
    
78. 
    The findings call for proactive measures by the local assemblies and executives to inform and involve their populations in budget preparation and monitoring. In fact, for tax collection as well as use of local resources, the main finding is that citizens do not feel informed enough to answer the question, Forty-two percent of respondents indicate that they do not have enough information to assess their local governments’ performance in tax collection, and 52 percent do not have an opinion on the use of local resources. Forty-one percent of the respondents who did answer approve the performance of their municipalities in tax collection. In contrast, the rating falls to only 26 percent for these who respond concerning the performance in use of local resources.
    
79. 
    The field visit confirmed that, despite an open policy, the culture of accountability is still not entrenched, on neither the side of the municipalities’ executive or assemblies nor on the citizens’ side. Municipal authorities indicated several times that rules exist permitting citizens’ participation and that municipal assemblies’ sessions are open to the public, thus allowing citizens to raise any issues they would like at the beginning of the session. However, this passive openness falls very short of proactive outreach to encourage citizen participation. Similarly, the fact that municipal budgets are published in the Official Gazette is positive, but will not be enough to support strong accountability. The municipality of Praia’s opening of a public room in which citizens can consult the budget is a small step in the right direction. Finally, it is not always clear whether remedial measures exist for citizens, for instance, in cases of abuses by tax collection officers.
    

Municipalities’ Capacity

80. 
    One main constraint on the municipalities is the skills mix of their staff. Table 4.13 shows that a majority of the municipal staff have no secondary training.⁵⁸ The municipalities suffer from the fact that, in general, careers in the central administration and living conditions are more attractive in one of the two largest urban centers.
    
81. 
    Municipalities also have suffered from the distinction between the “common” civil service statute and the “specific” ones. Municipal staff careers and remuneration follow the “common” rule, while many central administrations, in particular, the financial and fiscal ones, are ruled by “specific” schemes, with higher remunerations. Finally, in some cases, municipalities inherited an excess of personnel who lacked the needed profiles to fulfill the new mandates.
    
82. 
    The solution is likely to lie in a combination of measures. The current civil service reform attempts to reduce the number of “specific” statutes, which should reduce discrepancies within the civil service. A capacity building program for some municipal staff is an option, but it needs to be well-targeted. Not every staff can fully benefit from specific training, and the main issue will remain the retention rate of the staff once trained. Finally, more creative solutions can work, as the example of Sao Vicente shows with the use of retired staff for the fiscal unit.
    
83. 
    The Municipal Information System (SIM) developed by NOSI (including the financial management system also used at the center, SIGOF) is a modern tool to strengthen municipal management capacity and communication between the central level and the municipalities, and among municipalities. Financing has been secured for installing it in 12 municipalities. Implementation will continue in 2008, with an extension of the system to the 7 remaining municipalities (Santo Antão, Sao Nicolau, Boa Vista, and Maio).
    

Table 4.34: Number of Staff per Education Level

	Praia	%	S. Cruz	%	S. Domingos %		Mosteiros %
Illiterate	48		26		3		9
Preschool level	10		4
Literacy course	47		19		4		4
Subtotal	105	10.67	49	11.69	7	5.74	13	10.92
Primary school	442		231		40		61
Subtotal	442	44.92	231	55.13	40	32.79	61	51.26
High School––1º Cycle	57		25		8		10
High School––2º Cycle	61		37		29		22
High School––3º Cycle	42		11		11		8
Subtotal	164	16.67	76	18.14	50	40.98	41	34.45
Gradute studies––Bacharelato	2		1		3		1
Graduate studies––Licenciatura	31		1		1		1
Graduate studies––Pós-Graduação	1
Subtotal	34	3.46	2	0.48	4	3.28	2	1.68
(No information in central database)	239	24	61	15	21	17	2	2
Total	984		419		122		119

Source: 2005 Human Resources Management Database.
Box 4.4: Municipality of São Vicente - Impact of Introducing IT

In just a few years (the reform started in 2001), dramatic progress has been achieved in financial management by introducing IT solutions. This IT solution, developed with national expertise under the leadership of NOSI (dependent on the Prime Minister’s office), has been installed in three municipalities and is being rolled out in all municipalities of Santiago, Brava, and Fogo islands.

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  Electronic filing: Prior to the reform, Sao Vicente used 22 different books to store information on the city budget and other transactions. People were brought in from outside––in some cases, students on vacation––to help with input of data. Now, 100 percent of accounting and treasury data are on computer.
  
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  Budget: Almost all municipal budget operations are performed online.
  
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  Tax: Through the greater control and supervision offered by a computerized system, the municipality has been able to triple its tax income since 2001. The increase is due to greater efficiency rather than higher statutory rates. Due to an integration of various records, a citizen in arrears on municipal taxes, for example, might not be allowed to obtain a permit for a car. It should also be noted that the municipality hired retired skilled personnel to assist it in establishing an efficient tax collection department.
  

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