Decentralization reforms in Ghana are being undertaken to empower communities to more actively participate in planning, budgeting, and monitoring government revenues and expenditures priorities.
To support these reforms, the Government in 2010 issued a Decentralization Policy Framework which identified fiscal decentralization as critical to enable District Assemblies to have the appropriate funding and financial management arrangements to enable responsive local governance and efficient and accountable public service delivery.
Effective fiscal decentralization in Ghana requires the rational allocation of expenditure and revenue responsibilities, intergovernmental transfers, and subnational borrowing, within an accountable public financial management system.
These components must be designed and implemented in a coordinated manner to improve public service delivery efficiency and accountability, promote a more equitable distribution of services and resources across the country and enhance more accountable and responsive governance and public service delivery.
To better support fiscal decentralization, the Ministry of Finance established the Fiscal Decentralization Unit (FDU) within the Budget Department in 2011.
The Fiscal Decentralization Unit was established as the focal point within the Ministry of Finance to support the Intergovernmental Fiscal Framework aimed at providing a comprehensive framework for the long-term development of intergovernmental fiscal arrangements, including the assignment of expenditure responsibilities, revenue responsibilities (internally generated funds), intergovernmental transfers, borrowing and institutional arrangements.
The primary aim of the Fiscal Decentralization Unit is to develop and formulate financing policies and funding arrangements for effective functioning of the Metropolitan, Municipal and Districts Assemblies (MMDAs). In this regard, the FDU is responsible to:
- Support and monitor the design and implementation of fiscal decentralization guidelines,
- Facilitate the coordination with political and administrative decentralization components, overall fiscal policy and public financial management reforms,
- Monitor, review, and rationalize the intergovernmental fiscal transfer framework to ensure consistency, coordination and integration with government-wide fiscal policy, public financial management and fiscal decentralization objectives,
- Support improved policy and administration related to MMDA IGF mobilization and MMDA-level borrowing, and
- Support and monitor improved MMDA-level composite budget formulation, implementation, reporting, and auditing.