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Expenditure Assign in the Society

  • Date Submitted: 10/23/2013 01:29 PM
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                                              Expenditure assignment in the society
Fiscal decentralization involves shifting some responsibilities for expenditures and/or revenues to lower levels of government. One important factor in determining the type of fiscal decentralization is the extent to which subnational entities are given autonomy to determine the allocation of their expenditures. (The other important factor is their ability to raise revenue.) This note outlines principles and best practice and highlights how country specifics will ultimately be the best determinant of expenditure assignments.
It is important to clarify where local governments can determine the allocation of expenditures themselves versus those where the center mandates expenditures and local levels simply execute those expenditures. When statistics on subnational finance are available (most notably in the IMF’s Government Finance Statistics) these two types of expenditures are usually aggregated and one figure is provided on "percentage of subnational expenditures." Thus, analysts must be very careful when using this as in indicator of local autonomy, as autonomy will not be enhanced unless the funds are not tied by the center. (Of course, some countries do derive the benefits of local expenditure autonomy as a result of local governments’ ability to access the funds and circumvent the central mandates!)
Unitary and federal governments provide different opportunities for fiscal decentralization. Unitary countries do not have sub-national governments that are constitutionally empowered to make decisions over a specified range of government functions and services; rather, they have multiple subordinate levels of the same government (e.g., central, provincial, district). Federal governments, on the other hand, have constitutionally protected sub-national governments and thus, the possibilities for independent decision making are clearly stronger under these systems. It is important...

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