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Stefan Leiderer et al. Box 9: The Local Development Fund A new financing mechanism for local development was proposed in a recent study (GFA 2005) commissioned by the MoLGRD and supported by UNCDF and KfW. The purpose of this new mechanism would be to establish a nation-wide sustainable, standardised and transparent financing mechanism in the form of a countrywide basket financing mechanism that would consolidate existing financing mechanisms into a common system for financing capital investment at the decentralised level. The specific objectives of the LDF are to: • Support planning and management of development resources at the assembly and community level; • Provide resources which ensure that development investments respond to the priority development needs; • Facilitate the implementation of the National Decentralisation Policy; and • Enhance the accountability of local authorities to their constituents. The proposed LDF would be managed by a special management unit within the NLGFC and offer four different financing windows (Community Fund, Local Assembly Fund, Urban Fund, and Performance/Capacity Building Fund) in order to accommodate different needs and objectives of donors and recipients. Funds channelled through the LDF could thus be earmarked for specific sectors, themes or windows. By the time of writing the approach had been endorsed by the Government of Malawi and all important stakeholders, including MASAF, had signalled their support to the LDF. Source: GFA (2005) 72 German Development Institute
Public Financial Management for PRSP Implementation in Malawi The DDF is a (mostly donor funded) municipal development fund accessible only to rural districts. 22 Its allocation is partly formula-based, with 30 percent equally distributed between districts and 70 percent allocated according to population and poverty indicators (GTZ 2004, 1; Boex et al. 2001, 18). The DDF is managed by the NLGFC and serves to channel funds to finance small-scale projects and activities emerging from the District Development Plan. In order to access project funding from the DDF certain minimum conditions apply (GFA 2005, 57): — A Director of Development and Planning, two Accounts Clerks and a Works Supervisor must be in place — Quarterly progress reports and monthly financial statements must be produced by the DA and sent to the Decentralisation Secretariat/Ministry of Local Government and Rural Development — An annual investment plan must be approved by the Assembly by the end of January each year — three quarters of the projects approved from the previous planning period must be successfully completed. It is the NLGFC’s responsibility to ensure that resources provided through the DDF are properly managed (Simwaka 2003, 5). Therefore, in theory, the institutional setup of Malawi’s PFM system, as outlined in Figure 5, is relatively well designed Responsibilities are to a large extent clearly defined and distributed between actors. However, as seen in the next section, this formal framework bears little relevance for actual PFM practice in Malawi. 22 At the time the research was undertaken UNDP/UNCDF, the African Development Bank (AfDB), NORAD, DANIDA, CIDA and DFID among others (including non-governmental organisations) were channelling significant funds through the DDF to support Malawi’s development. (Gama et al. 2003, 30; GTZ 2004, 1; GFA 2005, 56). Currently, with strong support from German Development Cooperation, a Local Development Fund (LDF) is being drawn up, which will integrate the different funding mechanisms into one single financing mechanism for local governments in Malawi, open to towns and districts as well. The LDF will be managed by a special unit within NLGFC. German Development Institute 73
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Studies Deutsches Institut für Ent
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Preface The present study on ‘Pub
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4 The Case of Malawi 44 4.1 Why Mal
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Bibliography 151 Annexes 157 Tables
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Boxes and Tables in the Annexes Box
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DS EHP ESAF EU GBS GDP GoM GRF GTZ
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Discussion Paper 16/2007 Schirm, St
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