A Users' Guide to Measuring Local Governance

17
Assessments Informing Performance Based Grant Systems
(PBGS)
Producer
Various performance based grant systems have
been supported by UNCDF, UNDP, World Bank in
different countries and at different times.
History
The original idea behind the elaboration of
performance based grant systems originated from
UNDP and UNCDF and was applied in a few
districts in Uganda from 1997. These systems
have been developed in order to address the
shortcomings of generic financial transfers from
central to local governments that do not provide
incentives for efficient use of financial resources.
The experience in Uganda has been taken as an
example for replication in other African and Asian
countries. In many cases, PBGS are applied as an
incentive for local governments to improve
performance for good and local governance (e.g.
Uganda, Tanzania, Nepal). It is this type of
assessment methodology that is examined here.
Objectives
The Performance Based Grant Systems (PBGS) are
aimed at promoting a positive change in some
aspects of the performance of local governments,
which receive or try to access grants. In particular,
they have the following specific objectives:
• To promote strong incentives for local
governments (as corporate bodies) to improve
in key performance areas”
• To adapt the size of the grants to the
expenditure and performance capacity in the
key functional areas of local government
(planning, budgeting, financial management,
fiscal capacity, budget release and programme
execution, communication and transparency,
monitoring and evaluation)
• Supplement needs assessment and monitoring
and evaluation systems
• Improve management and organisational
learning
• Strengthen capacity development efforts
(focus and incentives)
• Improve accountability (up/down), participation
and citizens’ access to information
• Shown to be a good tool to bring funds onbudget
and streamline/mainstream/coordinate
donor support
Applicability
PBGSs can be applied to both a particular type of
performance, which the grant is trying to leverage,
or to a particular use of funds. In the first
case, PBGSs may be used in a “multi-sectoral”
perspective, that means when aimed at improving
the overall generic institutional/organisational
performance of local governments, or for a “sectorspecific”
purpose related to the achievement of
certain service-delivery targets, such as number of
classrooms constructed or measures of various
unit costs. In the second case, national governments
(and/or donors) can request local governments to
use the financial allocation for multi-sector (such
as capital investments) or for specific usage
in some specific sectors – such as education – or
specific initiatives – such as classroom construction.
The PBGSs can also be used to identify capacity
building gaps and needs of local governments and
to provide inputs to the overall monitoring and
evaluation, and supervision systems.
Types and sources of data used
Administrative data and information on population,
budgets, procedures and audits related to the local
government. Indicators may be both quantitative
and qualitative. Data are supposed to be collected
both at the central government level (e.g.
accounts, ex-post audits, general inspections, etc.)
and at the local government level (analysis of local
governance performance through field-visits).
Information is mostly objective.
124 UNDP Oslo Governance Centre