Internal Resource Mobilization of the Urban Local Government in Bangladesh

1.1 Background

The Pourashavas are one tiers of urban local government in Bangladesh. There is both cooperation as well as separation of activities between the urban local government and the central government in regards financial management and administration, maintenance of law and order, prevention of law and order, development of infrastructure etc.

For the reason, local governments will have to develop a history of generating an annual surplus of revenues over expenditures. So, not only must the local government manage its finances well, they must be able to present well maintained budgeting and accounting records to verify their performance. There are only three ways that a local government can reliably develop a surplus that they can commit to long term debt repayment.

They can increase their “own source revenues” as currently defined.

They can reduce their expenditures.

They can develop new sources of revenue.

In Bangladesh, the income of Pourashava depends on government grants and internal revenues. The income is not well enough to maintain all the functions. It needs to find out the income first and then expenditure of the Pourashava. The financial activities of a Pourashava may be classified as Accounting, Budgeting and auditing. Budget means the anticipated income and expenditure of a year to maintain all responsibilities in a Pourashava every year a budget has been sanctioned.

1.2 Statement of the Problem

It is identified that the problems of Pourashava finance are many and complex and the present level of understanding about the problems and prospects of Pourashava finance management and administration of a Pourashava in the country is inadequate. It is clear that in Bangladesh the Pourashava allows face the gap between income and expenditure which is the constraint for any development. As for it is essential to find out the existing income sources and expenditure pattern of the urban local government and attempt  to  minimize the gap of income and expenditure is needed to find out the potential revenue-generating sources, as for mobilizing the internal resources for better financial management of the Pourashava.

1.2.1 What is Resource Mobilization?

Resource mobilization means to increase the financial capability of the urban local government for over all development.

1.2.2 Why Resource Mobilization?

Ø  Better financial management

Ø  Proper institutional management

Ø  Social and political credibility

The process of mobilizing resources begins with the formulation of a resource mobilization strategy, which may include separate strategies for mobilizing financial and in-kind resources. Carrying out a financial resource mobilization strategy includes the following steps: identifying potential sources of funds, actively soliciting pledges, following up on pledges to obtain funds, depositing these funds, and recording the transactions and any restrictions on their use. The process is generally governed by legal agreements at various stages.

1.3 Objectives

ü  To explore the existing sources of income and items of expenditure of Nowapara Pourashava

ü  To identify the problems and prospects of Internal Resource Mobilization of the study area

1.4 Rationale

The Pourashava of Bangladesh receives the power revenue collection and obligation of providing urban public services through the Pourashava ordinance, 1977. The Pourashava of Bangladesh can generated internal resources through taxes, rates, fees and rents from own property. These are collected to defray mainly the expenses of establishment and maintenance of roads, water supply system, conservancy and electricity for lighting the roads. Government grants constitute a significant portion of Pourashava income .this study is mainly based on finance and administrative in terms of urban management. Because every Pourashava has a huge number of responsibilities. To operate all these responsibilities properly they have to depend on its income and its administration of proper management. Obviously Pourashava has an administration and finance mechanism, but it does not play in rational way.

So finding out the existing phenomenon it should develop a strategy for the financial management and administration. And find the potential revenue generating sources for Pourashava self-financing and well management. For this reason this study will be conducted.

1.5 Scope and Limitations

Resourcing is defined as “the total means available to local government to meet local developmental objectives aimed at increasing the quality of life for its citizens”. These include financial resources; Pourashava land and buildings; extensive networks with community, private and international organizations; planning instruments; knowledge of markets; business and financial management expertise; and linkages to the international donor community and finance institutions.

Now the Pourashava can influence significantly the ideal assignment of public service responsibilities and revenue generating powers among levels of government, as well as the types of reforms required to deal with existing system deficiencies. In this study also highlight some of the innovative means local government has developed to raise and efficiently utilize local, national and international resources to meet local objectives.

In the present study, the following are the limitations

ü  Limited time

ü  Money problem

ü  Detailed data are not available in a systematic manner.

1.6 Research Assumptions

ü  The site as well as the Pourashava, the services delivery systems are not well enough and the tax collection system is very poor.

ü  A gap exists between the income or revenue collection and the expenditure pattern. This gap always is negative.

ü  The Pourashava has some innovative sources and own property in which it can be developed for income generating.

ü  The immovable properties of the Pourashava are not properly utilized.

2.1 Introduction

The Pourashavas are one tiers of urban local government in Bangladesh. Financial accountability and sustainability in the urban local government institutions are of great importance in Bangladesh, especially now as the country grapples with the imperative of good governance coupled with increased needs and demands for more decentralization and effective local government institutions. (T. Temple: 2002: p1).

There are ample literatures on urban local government financial. Some of the relevant literatures, both published and unpublished are reviewed to identify the knowledge gap.

Shaikh Muhammad Mehedi Ahsan (2002) in his BURP Dissertation “Municipal finance of a small town in Bangladesh: A case study on Magura Pourashava” he mainly focused on; municipal services largely depend on central government allocation and investigated the income and expenditures of the Pourashava. He find out that the income of the Pourashava is very much dependent on Government allocation, municipal Services are also concentrating with the central part of the town, The revenue source concentrated with the central part of the town, The allocation mainly depends on political influence. But he did not try to find, how to minimize the gap between income and expenditure and for development he did not try to mobilize the internal recourses for self-financing of a Pourashava.

Shultana Ferdous (1999) in her BURP Dissertation “Expenditure pattern of a Pourashava: A case study on Kushtia Pourashava” centered on discussing the expenditure pattern of a “A” class Pourashava namely Kushtia. More specifically this study discusses the expenditure pattern in terms of size of expenditure, heads of expenditure, per head expenditure, reasons for expenditure variation and effects of variations. But she did not concentrate on Pourashava income. Other hand, the size of the expenditure is depends on its income.

Monitoring and Evaluation consultants, UGIIP in their report “Benefit Monitoring and Evaluation (BME) (Octobor2005 to June 2006)” focused on the sector specific indicators (roads including culverts/bridges and drains); general indicators (urban governance/UGIAP- citizen awareness and participation, women’s participation, integration of the urban poor, financial accountability and sustainability, and administrative transparency; public health and land value). In the case of financial accountability and sustainability of the Pourashava, emphasis on the efficiency of tax collection in the UGIIP Pourashavas due to various means and tools applied by the project Pourashavas is very encouraging, in case of tax collection.

The World Bank (1999) in their report “Bangladesh municipal finance sector study” has investigated about the current expenditure assignment, the size and composition of municipal expenditures, causes behind the unfulfilled needs at the local level, growth and disparities of municipal expenditures. It is initiated to understand that the rapid population growth has changed the financial management/expenditure in Bangladesh. The study focuses on municipal budgeting and financial management, revenue assignment and mobilization, intergovernmental transfers and NGOs and the private sector.

David C. Jones, C.P.F.A., F.C.C.A. (UK) (2000),   in his research “Capital investment and its financial implications: Budgeting and Financial Management for Local Government” discussed on the prioritization of fixed asset implementation activity and the related access to urgent and important funding sources. It will also show how the vision and operational strategy of a community is reflected in the program for capital expenditures. They considered the costs of replacement or rehabilitation of equipment that will not continuously serve with optimum efficiency, or even become unserviceable, during the life-cycle of the principal project assets.

James McCullough, Ronald Johnson (1996) in their paper “Case Study on Urban Local Government Finance” presents case studies of local government finance reforms which are part of the larger governmental decentralization movement that has been gaining momentum around the world for the past 15 years. This movement has been strong in Asia overall but translating it into concrete applications of fiscal reform

at the local level has been slow and uneven.

RTI (2005) in their paper “Expanding Municipal Own Revenue” they focused on the potential of municipal own revenues to grow as types and of local powers over them to expand is being exhausted. If no changes are made, the growth will slow up and then cease in the years to come. They proposed: Outpacing growth rate of local taxes over other revenues by the way of Introduction of new tax revenue sources and increasing Municipal Powers to control Tax Revenue.

RTI International (2002) in their report “Municipal Financial Analysis and Planning Model for Municipality of Nessebar, Bulgaria” has focused the municipal financial analysis model are analyzing the financial consequences of the adopted (produced) municipal development strategy, financial planning when the resources are limited, hence the need to improve the efficiency of the investment program, monitoring the present financial situation of the municipality, visualising the effects of the implemented development strategy (e.g. restructuring the utilities, municipal service management). It is an attempt to meet the local authorities’ need of a tool that would serve the purpose of long-term revenue and expenditure planning and analyze the impact of any liabilities the municipality incurs today on its future budgets.

David C. Jones, CPFA, FCCA (UK) (2003) in his reports “Municipal Accounting” was a complete set of final accounts. This incorporates all activities, as examples, of budgets, basic records and ledger accounts using the accrual method of accounting, with hypothetical numbers introduced (for balancing and completeness) where using these in the examples would be redundant. There is a complete trial balance of the accounts of an actual local government. Then come all the ledger accounts needed for the final accounts. Annual financial statements are shown in “standard” (debit and credit) formats as well as in “narrative” formats. Two different balance sheet formats are shown. One is consolidated. The other divides the balances between the capital and revenue (recurrent) items. Here they mainly focused on transparency and accountability of the municipality.

Research training institute, North Carolina, USA (1999) in their research “Financial analysis Model-FAM: For application at Croatant Municipalities” had prepared the Financial Planning Model for dual purpose. The first, is to facilitate quick estimation of the financial condition of municipalities and to estimate their credit rating capacity. And the second is to provide the municipalities with analytical instrument for planning and management purposes. By this model they wanted to create a detailed projection of particular categories of budget revenues and expenditures, which serves as a basis for development of municipal budgets in successive budget years over the following 5-10 years. As for the financial projection model is a possibility to develop a multi-year investment plan funding allocations and to determine optional and optimal project financing instruments. The model enables to define the impact of financial or investment decisions on future budgets.

A numerous studies have been conducted in the field of urban local government finance.  By all the reviewed literature, it is identified that the problems of municipal finance are many and complex and the present level of understanding about the Problems and prospects of municipal finance management and administration of a Pourashava in the country is inadequate. It is therefore necessary to build a knowledge and information based by examining the related issues more critically. Here it is clear that in Bangladesh the Pourashavas allows face the gap between income and expenditure which is the constraint for any development. As for the current research try to  minimize the gap of income and expenditure in the way of finding the potential revenue-generating sources, as for mobilizing the internal resources in the Pourashava.