An assessment of internally generated fund and its contribution for District Development expenditure: A case of Asutifi District, Ghana.

During the 1990s, fiscal decentralization and local government reform were among the most widespread trends in most developing countries like Ghana. As part of this process a number of policy instruments were developed to empower district assemblies. DAs in Ghana are entitled to mobilize resources locally for their expenditure needs. Internally Generated Fund (IGF) of the sub-national governments is basically the own-sourced revenues of District Assemblies’. Internally generated revenue as per the Sixth Schedule of the Local Government Act, 1993, Act 462 consists of funds collected exclusively by or for sub national governments. Taking the past eight years data, this research assessed and examined the role and contribution of internally generated fund for the development of the district in response to the existing challenges and problems of the district. A case study approach is used as this approach is strong in external validity and will enable for extrapolation of the research results to general populations with similar characteristics. Secondary and primary data were used for the study from field sample surveys and documentations. Statistical tools such as correlation and regression analysis are used to find the linkage between IGR and development expenditure for the past eight years (2003_2010). For the major components and revenue zone of IGR further analysis is carried out using additional statistical tools such as distribution quotient. Cost benefit analysis, as a tool is deployed to measure the efficiency of the established system in the district. The trend analysis revealed that the IGF and development expenditure of the district have a positive and strong relationship. Both IGF and development expenditures have improved through time. However the change in IGF has mainly accrued due to land royalty from gold mining companies since their establishment in the district. Insufficient revenue base, existence of two independent institutions working for IGF, poor organizational structure and revenue administration mechanism, gap on knowledge and understanding of revenue, weak voluntary compliance, revenue leakage/corruption and weak participation of important stakeholders are some of the key findings of the study. The study further noted that the district planning, monitoring and evaluation system is poorly designed. It is also noted that the district spends higher cost to raise IGF from the different sources excluding land royalities. Policy level and operational recommendations are forwarded to improve IGF mobilization and thereby to strengthen the fiscal decentralization program. These include restructuring of the organization, expanding the revenue base and capacity building programs are few to mention. Although IGF mobilization trend in the district has shown improvement over time, critical review indicates that these changes are mainly associated with the emergence of gold mining industries such as Newmont Ghana, that pay land royalty of which the district gets most of its IGF. Considering the question of sustainability of this source, it is recommended much effort is needed to improve the overall performance of the system. Committed and qualified leadership and personnel along with strong policy and legal backing are needed to restructure the prevailing challenges.

Source: KNUST