UNIVERSITY FOR DEVELOPMENT STUDIES (UDS) [602703]

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UNIVERSITY FOR DEVELOPMENT STUDIES (UDS)

INTERGOVERNMENTAL TRANSFER OF FUNDS AND THE INCENTIVES FOR INTERNAL
REVENUE MOBILIZATION IN THE LAMBUSSIE -KARNI DISTRICT

YIRBEKYAA NAA -I-BAA PASCHAL
2016

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UNIVERSITY FOR DEVELOPMENT STUDIES (UDS)

INTERGOVERNMENTAL TRANSFER OF FUNDS AND THE INCENTIVES FOR INTERNAL
REVENUE MOBILIZATION IN THE LAMBUSSIE -KARNI DISTRICT

YIRBEKYAA NAA -I-BAA PASCHAL

This dissertation is submitted to the Faculty of Law and Business Studies in partial fulfilment of
the requirements for the award of a Masters of Commerce Degree

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DECLARATION
Student's Declaration
I hereby de clare that this thesis is my original research whose findings have not been presented for
another degree in this university or elsewhere and that all citations in the work have been duly
acknowledged.

Student ’s Name : Yirbekyaa Naa -I-Baa Paschal Student ’s Signature ……………… ……….. ……

Date……………………………….

Supervisors’ Declaration
I hereby declare that I supervised the preparation and presentation of thesis in accordance with the
rules and regulations of the University for Development Studies (UDS).

Supervisor’s Name…………………………………………… Supervisor’s Signature ……………………….

Date……………………………….

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DEDICATION
This thesis is dedicated to my lovely wife Portia Kpinbo and my children Vanessa Cecilia Nuo,
Arnold Gbevillah and Angel Mwinsodanno

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ACKNOWLEDGMENTS
I am most grateful to the Almighty God for his guidance and protection throughout this study. I
would like to express my profound gratitude to my supervisor William Angko whose dedicated
commitment and constructive criticism is the result of this work.
I am also grateful to the staff of the Lambussie -Karni district for their support during the data
collection especially Issifu Benin, Suollo Philip, David Zimi and Dapillah Basil who helped
administered the questionnaires for me.
My heartfelt thanks goes to M rs Emelia Dzang and Madam Teresa Kpinbo for your constant
support.

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List of Acronyms
CIDA – Canadian International Development Agency
DANIDA – Danish International Development Agency
DACF – District Assemblies Common Fund
DDF – District Development Facility
DAs- District Assemblies
FOAT – Functional and Organization Assessment Tool
GOG – Government Of Ghana
IGF- Internally Generated Fund
KFW – German Development Bank
LKDA – Lambussie -Karni District Assembly
MTDP – Medium Term Development Plan
MMDA – Metropolitan, Municipal, District Assembly

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Table of content page
Title page…………………………………………………………………………. ………………… ………………. ……… i
Declaration…………………………………………………………………………… …………….. ………….. …………… iii
Dedication …………………………………………………………………………………………………… ………………. iv
Acknowledgement ……………………………………………………………………………. ………….. ……………… v
List of acronyms ……………………………………………………………………………………………… ………….. vi
Table of content ……………………………………………………………………………………………… ………….. vii
List of Appendix ………………………………………………………………………. …………………………………… x
List of Table ………………………………………………………………………………………………… ……………. x i
List of figures ……………………………………….. ………………………………………………………. ……….. … xv
Abstract …………………………………………………………………………………………………….. ………………. xv i
Chapter One: Background ………………………………………………………. …………. ……………………. ……1
1.0 Introduction …………………………………………………………………………… …………. ………….. ….1
1.1 Problem Statement ……………. ………………………………………………………………… ………… … .4
1.2 Significance Of The Study ………. ………………………………………………………… …….. …………. 5
1.3 Research Objectives …… ……………………………………………………………………………. ………. 7
1.4 Research Questions ………. …………………………………………………………………………….. ……….8
1.5 Methodology ….. ……………………………………………………………………………………………….. …8
1.6 Limitations And Delimitations ……………………………………………………………… …………… 1 0
1.7 Organisation Of The Study ……… ……………………………………………………………………. …… 11
Chapter Two: Literature Review ……… ………………………………………………………….. ……………. 12
2.0 Introduction ……………. ………………………………………………………………………………………. .. 12
2.1 Decentralization …. ……………………………………………………………. ……………….. ………… ….. 12
2.2.0 Fiscal Decentralization ……. ………………………………………………………………….. ……… ………. 2 4
2.2.1 Guiding Principles Of Fiscal Decentralization …………………… …………………… ………… …….24

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2.2.1.1 Assignment Of Expenditure Responsibilities ……….. ……………………………………… …….. 25
2.2.1.2 Assignment Of Tax And Revenue Responsibilities ……… …………………… ………………… .. 27
2.2.1.3 Intergovernmental Fiscal Transfers ………… ………………………………………………………. ….28
2.2.1.4 Sub National Borrowing ………… ……………………………………………….. ……………… ………. 33
2.3 Incentive Approach To Fiscal Decentralization … …………………………………………… …… 33
2.4 Arguments In Favour Of Fiscal Decentralization ………. ……………………………………….. … 36
2.5 Argument Against Fiscal Decentralization …………….. ………………………………………….. ….37
2.6 Fiscal Decentralization In Ghana ………………. ……………………………………………………….. . 39
2.7 District Assembly's Financial Resources ……. ………………………………………. ……………… .. 39
2.7.1 Internally Generated Fund ……… ………………. …………………………………….. ……………….. .. 39
2.7.2.0 Intergovernmental Fiscal Transfers … …………………………………………………… ………….. … 43
2.7.2.1 District Assemblies Common Fund …….. ……… ……………………………………. …….. ……… ….43
2.7.2.2 Recurrent Expenditure ……………… ……………………………………………………………………. … 44
2.7.2.3 Ceded Revenue ……………….. ………. ……………………………………………………………… ……. 44
2.7.2.4 District Development Facility ….. ……………………………………………………………… ………. 45
2.7.3 Other Financial Arrangement ……. ………………………………………………………………. ………. 49
Chapter Three: Methodology ……………. ……………………………………………………………………… .. 50
3.1 Introduction ………. ……….. …………………………………………………………………………………… ..50
3.2 Research Design ….. ………………………………………………………………………………………… …..50
3.3 The Study Area ………………………………………………………………………………………….. …….. 50
3.4 Location And Size .. ,………………………………………………………………………………….. ………. 51
3.5 Demographic Characteristics …. ………………………………………………………………………. ….. 53
3.5.1 Population ………… ………………………………………………………………………………………….. … 53
3.5.2 Ethnicity, Religion And Culture .. ……………………………………………………………………….. ..54
3.5.3 Migration …………………… …………………………………………………………………………………… 56

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3.5.4 Human Settlement Pattern ….. ……………………………………………………………………………. .. 56
3.5.5 Administrative Set -Up …… ……………………………………………………………………………….. .. 57
3.5.6 Composition Of The District Assembly ……………. ……………………………………………… … 58
3.6 Sampling Techniques And Sampling Size ……………………………………………………….. …….58
3.7.0 Types And Sources Of Data ……… ………… ………………………………………………………. ……..59
3.7.1 Secondary Data ……………….. …………………………………………………………………………….. .. 59
3.7.2 Primary Data ……….. ………………………………………………………………………… ………. ……….. 59
3.8 Data Collection Procedure ……. ……………………………………………………………………… ……. 59
3.9 Data Analysis ……………… …………………………………………………………………… ………….. ….. 60
3.10 Reliability And Validity Of Instruments …….. …………………………………………………….. …..60
3.11 Ethnical Issues …………………….. ……………………………………………………. ……………………. . 60
3.12 Limitations Of The Study …………….. ………………………………………………………………….. ..61
Chapter Four – Results And Interpretation ………. ………………………………………………… ………. 62
4.0 Introduction …………… ………………………………………………………………………. ……… ……….. 62
Chapter 5: Summary, Recommendation And Conclus ion …. ……………………………………………. ..120
5.1 Introduction ……………………… ……………………………………………………………….. ………… .. 120
5.2 Key Findings ………….. …………………………………………………………………………….. ……….. 120
5.3 Recommendations ……………….. ………………………………………………………………. …………. 123
5.4 Conclusion … ……… …………………………………………………………………………………. ……… . 124
References ………………………………………………………………………………………………….. …………. ….
Appendices …………………………………………………………………………………………………… …………….

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List of Appendix

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List Of Tables
3.1 Age Structure Of The Population ……………… ……………………………………………………. ….. 54
3.2 Religious Composition Of Lambussie -Karni District ….. ………………………………….. …… 55
4.1 Which Of These Transfers Have Incentives For Interna l Rev enue Generation ………….. 63
4.2 What Are Those Incentives For IGF Generation ………… ……………………………………… …. 63
4.3 Do You Think These Incentives Are Set To Motivate A District Like
Yours To Collect More I GF …. …………………………………………………………………………… …64
4.4 Has Your District Been Meeting Those Incentives Target ……………… …….. ……………….. 65
4.5 Effects Of Intergovernmental Transfer Of Funds On IGF …… …………….. …………………….66
4.6 How Are Rates Fixed …………… ………………………………………………………………………. …….66
4.7 Do You Have Rate Payers Register For All Components Of Rate Payers … ………………..67
4.8 What Efforts Has Your District Taken To Widen The Tax Net ……………… …………… ……67
4.9 Do You Have Stakeholders Who Help To Collect IGF ….. …………………………….. ………. 68
4.10 What Are The Main Sources Of IGF ……… ………………………………………………. ……………68
4.11 Do You Have Strategic Work Plan And Target Revenue ….. ………………………….. ………..69
4.12 Do You Set Monthly Revenue Targets For Your Revenue Collectors ………. ………………69
4.13 Do You Undertake Regular Monitoring And Auditing …………………….. ……………….. ….. 70
4.14 Lambussie -Karni District IGF Collections By Components …………. ………. ………. ……… 70
4.15 Revenue Components Performance As A Percentage Of Total Revenue
Collected From 2008 -2014 …. ………………………………………………………………………………. 71
4.16 Contribution Of Licences Against IGF (2008 -2014) ………. ……………………… ………… ….. 72
4.17 Performance Of Rates Against Total IGF (2008 -2014) …….. ………………………. …………. 72
4.18 Contribution Of Fees And Fines To Total IGF (200 8-2014) …. ……………………………….. .75

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4.19 Performance Of Rent Revenue (2008 -2014) ….. ……………………………………………… ………77
4.20 Performance Of Land Against Total IGF …… …………………………….. …………………… ……..78
4.21 Performance Of Investment Revenue (2008 -2014) ……. …………………………………….. …….80
4.22 Performance Of Miscellaneous Against Total IGF ….. ………………………………… ……… …..81
4.23 Lambussie -Karni District IGF Expenditure (2008 -2014) …….. ………………………….. ……. 82
4.24 Lambussie -Karni District IGF Expenditure (2008 -2014) …….. …………………………. ……….83
4.25 Performance Of IGF Agai nst Two Major External Grants With Incentives ………… ……..84
4.26 Lambussie -Karni District Area Council Revenue Performance ………….. ………………… . 86
4.27 Lack Of Current And Reliable Data …………………….. …………….. ……………………………… .88

4.28 Addressing The Data Base Challenge Will Require Skilled
Personnel And Financial Resources ……. ……………………………………………………………… ..88
4.29 Cost Of Generating Revenue Exceed Amounts Of Revenue Collected……. …………………89
4.30 Finance Staff Not Well Staffed To Undertake Revenue Mobilization …………. ………. …. 90
4.31 Weak Revenue Task Force …… ………….. ………………………… …………………………………….. .90
4.32 Traditional Rulers Are Not Active To Influence Tax Payment ……….. …………………. …… 91
4.33 Unrealistic Tax Rate Are Set Because There Is No Clear Cut Guidelines From
MLGRD. ………………………………………………………………………………………………………….. .91
4.34 There Is Revenue Leakages On The Part Of Revenue Collectors …. ……… ……… ………….92
4.35 Cost Of Gazetting Fe e Fixing Resolution Is High …………………… ………………….. ……….. . 93
4.36 Majority Of Tax Payers In Your District Do Not Understand The Purpose Of
Taxation, Their Responsibilities As Tax Paying Citizens And As A Result They
Are Not Willing To Pay Their Tax Obligations On Time ……………….. ……….. ……… …….93
4.37 Working With Other Institutions Such As GRA To Collect Revenue From
SME And Cede To The District ……………………………………………………………………………94

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4.38 Invest In Money Market To Facilitate Income Growth Without Risk ………………………..95
4.39 To Contact Land Valuation Bo ard To Value Land And Properties …………………………. 96
4.40 To Update Mechanised Payroll And Request CAGD To
Cede Basic Rate To The District……………………………………………………………………………96
4.41 Tax Education Is Important ………………………………………………………………………………..97
4.42 To Create Tax Payers Register Of All Components And To
Update It Regularly …………………………. ……………………………………………………………….97
4.43 The Current Street Naming And Property Addressing System Will Improve
Upon The IGF Collection ………………………………………………………… ………………………..98
4.44 Increase Tax Rates ……………………………………………………………………………………………. 99
4.45 Widen The Tax Net ……………………………………………………….. …………………………………100
4.46 What Is Your Term Of Employment ……………………………………………………………………101
4.47 Which Type Of Revenue Items Are You Collecting …………………………………. ……….. 102
4.48 How Many Tax Payers Are There In Your Area In Each Of The
IGF Component……………………………………………………………………………………………….102
4.49 How Do You Collect Revenue In Your Area ……………………………………………………… 102
4.50 How Long Does It Take To Account For The Revenue Collected
To The Revenue Office ………………………………………………………………….. ………………..103
4.51 Do You Have Stakeholders Who Work With You On IGF Mobilization
In Your Area ……………………………………………………………………………………………… .104
4.52 Have You Had Tra ining On Revenue Mobilization ……………………………………………. 104
4.53 What Is The Motivation Put In Place By The District Assembly To
Encourage You To Perform Well …………………………………………………. ……………………105
4.54 Are You Satisfied With Your Job ……………………………………………………………………….106
4.55 What Additional Incentives Or Motivation Do You Need To Improve

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Upon Your Work…… ……………………………………………………………………………………….106
4.56 Do You Have A Work Plan And Target Revenue For The Year ……………………………107
4.57 How Do You Describe Tax Payers In Your Area…………………………………………………109
4.58 As A Tax Collector What General Problems Do You Observe On IGF Mobilization …110
4.59 What Do You Recommend To Improve IGF Mobilization System In The District…….110
4.60 Rate Pa yers Interviewed And The Type Of Business ……………………………………………112
4.61 Do You Know The Objectives Of Taxation …………………………………………………………113
4.62 What Is It Used For ……………… …………………………………………………………………………..113
4.63 Do You Know That As A Tax Payer You Have Rights …………………………………………114
4.64 Do You Know Your Obligations As A Tax Paying Citizen . …………………………………..114
4.65 Have You Been Informed About The Purpose Of Taxation, Your Rights And
Obligations As A Tax Payer ………………………………………………………………………………..115
4.66 If Yes How Did You Find The Programme ………………………………………………………….115
4.67 If No How Do You See The Relevance Of Such Programme …………………………………116
4.68 What Is Your Current Mode Of Hon ouring Your Tax Obligation ……………………………116
4.69 Do You Believe Your Tax Payment Is Used To Run Various
Government Development Programmes ……………………………………………………………….117
4.70 IGF Mobilization System Is Exposed To Corruption And Misuse …………………………..118

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List of figures
2.1 Structure Of The New Local Government System ………………………………………………….16
3.1 Draft Map Of Lambussie -Karni …………………………………………………………………………….52
3.2 Structure Of Lambussie -Karni District Assembly…………………………………………………….57
4.1 Revenue Performance Of LKDA B y Components …………………………………………………..71
4.2 Performance Of Fees And Fines Revenue Against Total IGF ……………………………………73
4.3 Performance Of Rates Against Total IGF ………………………………………………………………74
4.4 Performance Of Licence Against Total IGF ……………………………………………………………76
4.5 Performance Of Ann ual Rent Against Total IGF ……………………………………………………77
4.6 Performance Of Land Against Total IGF ……………………………………………………………….79
4.7 Performance Of Investment Against Total IG F ……………………………………………………….80
4.8 Performance Of Miscellaneous Against Total IGF…………………………………………………..81
4.9 LKDA IGF Expenditure ………………………………………… …………………………………………..82
4.10 District Inflows Of External Grants ……………………………………………………………………..84
4.11 Performance Of I GF Against Two Major External Grants With Incentives .. ……………..85
4.12 LKDA Area Council IGF Performance …………………………………………………………………87

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Abstract
The sources of local revenue as specified by the Local Government Act 462 of 1993 available to the
district assemblies include fees and fines, rates, licences, rent investment among others to help fill
the financial gap between tied grants and the provision of other goods and services that are not
covered by central government transfers. This research wor k sought to improve upon the local
revenue mobilization of the Lambussie -Karni district by examining the intergovernmental transfers
of funds and the incentives for internal revenue mobilization in the Lambussie -Karni district. The
study employed the use o f Non -probability sampling techniques where the quota and purposive
sampling methods were specifically used to select a sample size of 60. Both quantitative and
qualitative research methods were used for the data collection. Using a trend series analysis o f data
from 2008 – 2014 the study found out that DACF and DDF are the only intergovernmental transfers
with incentives built in the to encourage the district to generate more revenue. On the contrary even
though there was gradual improvement in the IGF co llection, these transfers of funds do not
encourage the district to improve upon IGF collection. Notable problems are weak stakeholder
participation, lack of means of transport, lack of knowledge of citizen rights and obligations
resulting in tax payers ap athy, lack of tax register and revenue leakages. The study recommended
that the Lambussie -Karni district assembly should undertake regular monitoring and supervision,
tax education, establishment of a tax register and active participation of stakeholders

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CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND
Decentralization refers to "the transfer of political power, decision making capacity and resources
from central to sub national levels of government" (Walker, 2002). Smith (1985) defines it as a
process which involves the transfer of authority and power to plan, make decisions and manage
resources, from higher to lower levels of the organizat ional hierarchy, in order to facilitate
efficiency and effective service delivery.
There are many driving forces behind decentralization. These are varied in many countries. They
include political, social and economic forces. Although politics is the main driving force behind
decentralization in most countries, fortunately, decentralization may be one of those instances
where politics and economics may serve the same purposes. In trying to increase political presence
in the local governance system, people a t that local level must be willing to pay for the use of public
resources. (World Bank, 2001)
The realization of the benefits of decentralization would ultimately be tied to the ability of local
government to raise enough finances to provide the desired pu blic goods and services in their area
of operation. However, decentralization cannot function well if decentralized units are unable to
raise own sources of revenue or are not given the authority to make decisions about expenditures.

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Fiscal decentralizati on is to allow lower -level government to efficiently use resources that satisfy
local needs thereby avoiding indiscriminate waste and administrative cost experienced by the
centralized approach. Through budgetary participation, sub nationals must be inform ed about the
cost of provision of public services. This is because they are better placed to have more information
about the needs of the local people thereby increasing the provision of public goods and services at
a lower cost (Hayek ,1945 cited in Mogu es and Benin, 2012).
Fiscal decentralization can take many forms, including the following:
a) self-financing or cost recovery through user charges,
b) co-financing or co -production arrangements through which the users participate in
providing services and infra structure through monetary or labour contributions;
c) expansion of local revenues through property or sales taxes, or indirect charges;
d) intergovernmental transfers that shift general revenues from taxes collected by the central
government to local governments for general or specific uses; and
e) authorization of municipal borrowing and the mobilization of either national or local
government resources through loan guarantees.
In many developing countries, local governments have the autonomy to impose taxes, but due to
weak tax net and the dependence on central government subsidies they are unable to exercise this
authority (World Bank, 2001).
In Ghana, the concept of decentralization in practice, is restricted in the extent that local authorities
may have little control over their budgets. Substantial shares of revenues from central governments
are mostly tied up to certain expenditures that the district has no control over. This may in part due
to the fact that most revenues generated by these sub na tionals are made up of transfers from the

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central government and other donor pooled funds. To improve upon local governance systems, the
growth of Internally Generated Fund(IGF) should be the same as the flow of grants from central
government.
The concern therefore by many policy makers is how to fill the financial gap between tied grants
and the provision of other goods and services that are not covered by the central government
transfers. This clearly calls for the need of lower – level governments to mob ilize local revenue to
support the development gap. The sources of local revenue available to Metropolitan, Municipal &
District Assemblies (MMDAs) include fees/fines, property rates, licenses, rent, royalties,
investment and miscellaneous funds.
The quest ion therefore is how can MMDAs generate enough revenue to expand their fiscal
autonomy. It is in the light of the above that this thesis work sought to examine how external grants
affect the initiatives of t he Lambussie -Karni District Ass embly to collect their own revenue by
asking: how does the flow of intergovernmental transfer of funds and incentives prevent the study
area's initiatives to collect own revenues? This thesis paper sought to help the study area expand its
IGF collections to increase its fiscal autonomy.

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1.1 PROBLEM STATEMENT
The District Assemblies Common Fund (DACF) Act (Act 455) 1993 sharing formula uses five
main factors as inputs for disbursing funds. These factors are the equality, population density,
service pressure, development status and responsiveness factors.
The "equality factor" under this factor, the Fund is evenly distributed among the Assemblies
irrespective of population or size. The " population density factor" is to ensure that districts with
high population receives more of the Fund. The ''service press ure factor" ensures that the more
the population, the more the Fund the Assembly receives. This is meant to ease the pressure for the
need to provide public facilities. The ''development status factor'' the more developed a district is
the less of the Fund is allocated to the Assembly. Development status is measured by the number of
schools, the teacher pupil ratio, the number of health facilities and the ratio of doctors per the
population, the availability of electricity, telecommunication and postal ser vices, the presence of
banking and other financial institutions. All these information are provided by the relevant sectors.
The ''responsiveness factor'' : provides an incentive for Assemblies to generate own revenue and it
is measured by one variable, an increase in locally generated fund. A no -increase or a decrease
results in a zero per cent allocation. This is to motivate Assemblies to work harder at local revenue
mobilization. (Ahwoi 2010).
In order to bridge the financing gap and to improve the perf ormance of the MMDAs, the
Government of Ghana introduced a performance based grant system (the District Development
Facility) where access to additional development funds is linked to regular performance assessment

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under the Functional and Organizational A ssessment Tool (FOAT). The government and its key
development partners supporting decentralization have earmarked part of their support for the
implementation of the performance based funding to MMDAs. Under this system, good
performance is rewarded with a dditional financial resources, while weak performance is responded
to by tailor -made capacity building support
The District Development Fund (DDF) which was established in 2008 is discretionary, as such
funds are not earmarked or tied to specific sectors. MMDAs use it to finance their Annual Action
Plans which include the provision of basic school infrastructure and sanitation facilities, markets,
CHPS compounds, rehabilitation of roads and the provision of water through boreholes. The
Facility also provide s resources to train MMDA core staff on procurement, financial regulations
and accounting, revenue mobilization, documentation and records management among others . This
fund also introduced an incentive structure in the MMDAs systems to encourage own sour ce of
revenue collection by measuring the absolute and relative size of Internally Generated Fund and the
efforts of by MMDAs to improve IGF.
These two major development funds provide incentives for collection of own revenue to enhance
their allocation gr ants; yet the increase in the flow of external grants to the district, has not resulted
in corresponding increases in the growth of IGF.
This is the existing problem that governments and policy makers over the years are concerned with.
The study intends to find out how this existing problem of over reliance on grant from external
government will have on a relatively new District located at the hinterland where there are no
vibrant markets. This very question has been given much attention in the developed economies with

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just scanty of literature in the developing countries including Ghana probably due to lack of data
on local government finances.
Literature revealed that there have been cross country analysis on the subject matter. De Mello
(2000), sampl ed 30 countries in Latin America, Asia and the European countries to investigate the
relationship between fiscal decentralization and budget balances. The study suggested that
coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in
decentralized policy -making, particularly in the case of developing countries, which may not meet
important requirements for successful decentralization. Yongzheng Liu and Jianmei Zhao (2011)
used Chinese Provincial panel data from 19 95 to 2007, explores the incentives effects of total
central fiscal transfers and its components – tax rebates and the equalization grants – on provincial
tax efforts in China. Their theoretical model predicted negative impacts on provincial tax efforts
from both total fiscal transfers and equalization grants. Using the case of Ghana, Mogues and Benin
(2012), used a rich panel data from 1994 –2004 on 110 district assemblies’ public finances (revenues
from different sources and different types of public expen ditures) and other district -level data to
investigate the way that intergovernmental fiscal transfers and other external grants to local
governments affect local governments’ incentives to collect internally generated revenues and funds
(IGF). They found t hat despite an incentive scheme built into one of the major intergovernmental
grants, the flow of grants discourages local government taxation.
Hence this paper seeks to examine how intergovernmental transfers of funds affects the study area
initiatives to mobilize locally generated funds.

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1.2 SIGNIFICANCE OF THE STUDY
Local government fiscal autonomy is intimately tied up to their ability to generate local revenue.
The chunk of central government transfers are usually tied up to particular activities to be
undertaken by the local authorities. This research work will therefore be useful to the suggested
population to help improve upon their strategies to raise more local revenue to support its
developmental projects.
It would also add to the store of kn owledge in the decentralization policy review by the ministry of
local government and rural development. It may contribute useful empirical studies in the absence
of literature to future researchers who may be interested in the revenue mobilization in the district.
This study also intends to add to the existing literature on local government finances.

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1.3 RESEARCH OBJECTIVES
General Objectives:
The General objective of the study was to examine how intergovernmental transfers of funds and
the incentives for internal revenue mobilization in the Lambussie -Karni District. Specifically, it
sought to:
 To investigate the effects of intergovernmental transfers of funds have on the district's
initiatives for generating own revenue
 To find out the degre e of autonomy of the district to collect own revenue
 To identify possible source of internally generated funds.
 To investigate the degree of IGF growth and the growth of external fund

1.4 RESEARCH QUESTIONS
This research was guided by the following rese arch questions:
 What effects does grants from central government have on your initiative to generate
revenue locally?
 What is the degree of autonomy in setting revenue rates at the Lambussie -Karni District
Assembly?
 What are the major revenue sources in t he Lambussie -Karni District Assembly?

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 What is the growth rate of income for both IGF and external grants?

1.5.0 METHODOLOGY
1.5.1 Study Area
The Lambussie -Karni District is the ninth district to be created in the Upper West Region. The
district was creat ed from the Jirapa -Lambussie District Assembly by legislative Instrument LI 1849
in 2007. The Lambussie -Karni District lies in the north -western corner of the Upper West Region of
Ghana. It shares boundaries to the South with Jirapa District, to the East w ith Sissala West District,
to the West with the Lawra and Nandom Districts and to the North with Burkina Faso. The District,
therefore, serves as the National Gate way to Burkina Faso. The capital of the district is Lambussie.
Other major towns in Lambusi e-Karni district include Hamile, Samoa, Billaw, Piina and Karni. The
location of the District is strategic as its proximity to Burkina Faso could enhance cross border trade
and other mutual relationships in terms of exchange of ideas for the development of the District .
The district is also made up of four area councils – Lambussie, Hamile, Samoa and Karni. The
sample population will therefore be limited to these four area councils.
1.5.2 Sampling Techniques and Sampling Size
The study employed the use of Non-probability sampling technique where members are selected
from the population in some non -random manner. The study specifically used the quota and
purposive sampling methods. The quota system was used to select the respondents from the four
area coun cils – a sample size of 10 each. The purposive sampling method was used because of the
purpose in mind so as to meet the opinions of the targeted population quickly. The targeted
respondents are the key implementers of the decentralization process in the d istrict – District Co –
ordinating Director (DCD), District Finance Officer (DFO), District Budget Officer (DBO),

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Finance and Administration Sub Committee members among others of the assembly – as well as the
rate collectors and rate payers in the sample pop ulation.

1.5.3 Types and Sources of Data
The study employed both qualitative and quantitative methods for its data collection.
Questionnaires, in depth interviews, Key informants, personal interviews were used to collect both
primary and secondary data. Questionnaires were designed in such a way that protected the identity
of the respondents.
1.5.4 Data Analysis
The data has been presented using descriptive statistics where graphs, frequencies, tables, mean are
used for analysis.

1.6 LIMITATIONS AND DELIMITATIONS
Limitations
This research may encounter some setbacks and these may affect the internal validity and external
validity of the study. Some of these anticipated limitations are:
 Data gap: the study will be based on time series data from 2008 to date. Relevant data may
not be available.
 Co-operation on the part of stakeholders – potentially, stakeholders may feel reluctant in
releasing public information. Again, tax payers may also fear to openly disclose

27
information. However, the researcher wil l apply the correct ''tone'', by explaining to them
why the research is being undertaken and how the respondent can help.
 Limited time: the time frame to be used to research into this topic may be limited in
achieving the objective.
 Resources and energy – considering the vastness of the district that the population sample is
to cover, the researcher will not be able get the financial resources to be able to cover a large
range of the population.

Delimitations
Considering the limitations that this research may encounter, and the fact that the research may be
narrowed in scope, the findings would be contextual to the study area
1.7 ORGANIZATION OF THE STUDY
The study is presented in five chapters. Chapter One presents the background of the study, problem
statement, significance of the study, the objectives of the study as well as the research questions, the
limitations and scope of the study. The literature review is covered in Chapter Two, whiles chapter
three focused on the methodology of the study. Chapter Four dealt with the presentation and
analysis of data. Finally, the summary of findings, conclusion and recommendations of the study is
presented in chapter five.

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CHAPTER 2
LITERATURE REVIEW
2.0 Introduction
The chapter reviews the various theoretical works done by scholars in the field of decentralization.
There are different types of decentralization and this chapter will loo k at various thoughts on fiscal
decentralization and revenue mobilization by sub -nationals which forms the basis of this study.

2.1 Decentralisation
A growing number of countries around the world including many developing countries have
embraced the co ncept of decentralization though the concept differs from country to country.
Governments in developing countries made decentralization an important policy since the 1970s
and 1980s. Tanzi (1999) noted that, one key motivation for decentralization in a n umber of
countries has been the disenchantment of the electorate with the ability of the central government to
meet adequately the increasing demand for public goods and services.
Decentralization can be defined as "the transfer of authority on a geographi c basis whether by de –
concentration of administrative authority to field units of the same department or level of
government or by political devolution of authority to local government units, or by delegation to

29
special statutory bodies" (United Nations,19 96). Walker (2002) also defines decentralization as "the
transfer of political power, decision making capacity and resources from central to sub -national
levels of government".
In the public sector context, Manor (1998) and Ribot (2001) view decentralizati on, as a process by
which a central government formally transfers powers to actors and institutions at lower levels in a
political -administrative hierarchy. Decentralisation broadly entails the distribution of central
government's political, fiscal and adm inistrative power, authority and responsibility to
geographically dispersed, legally autonomous and semi -autonomous bodies of government. This is
done in order to increase efficiency and effectiveness in the provision of public goods and services
at centra l and sub national government levels. In Ghana's decentralization programme, ''local
authorities'' are the administrators of decentralized functions (Ahwoi, 2010).
Ghana’s decentralization as a government system encompasses three main facets that are commo nly
related as has been put forward by White (2011) which includes:
 De-concentration : thus the process whereby the central government disperses
responsibilities for certain services to regional branch offices without any transfer of
associated authority. A ccording White, many scholars do not consider this as true
decentralization;
 Delegation : this refers to a situation in which the central government transfers
responsibility for decision making and administration of public functions to sub -national
governme nts. Here, local governments are accountable to central governments but are not
controlled fully by the central governments; and

30
 Devolution : this happens when the central government transfers authority for decision
making, finance, and administrative mana gement to quasi autonomous units of local
government

Brief historical development of local government in Ghana
The earliest attempt of local administration during the colonial era was with the native authorities,
who centred on a chief or some unit of l ocal royalty which was not very defined. The native
authorities were not democratic but, but were mere representatives.
The municipal ordinance of 1859 established municipalities in the coastal towns of the Gold Coast.
In 1943, a new ordinance set up elect ed town councils for Accra, Kumasi, Sekondi -Takoradi and
cape coast and this ordinance was passed in 1953 following the Report of the Coussey committee.
This was followed, after the independence, by the local government Act, 1961, Act 54. Despite
these leg islation the distinction between central and local government institution was maintained.
This distinction led to the adoption of a "Dual Hierarchy Model". This model developed certain
problems and was replaced by the "single Hierarchy model" in 1974 which sought to abolish the
distinction between local and central government at the local level and create one common
monolithic structure to which to which was assigned the responsibility of the totality of government
at the local level.

31
The practical experime ntation with the single hierarchy model between 1974 and 1988 revealed
even more serious flaws than the dual hierarchy model. The reforms of 1988 aimed at combining
the best of the two models gave effective meaning to decentralization.
The Government of Ghana (GoG) in 1988 therefore embarked upon the implementation of a
comprehensive decentralization policy and local government reform programme aimed at
establishing efficient decentralized government machinery as a means to provide strong support for
participatory development. The 1992 Constitution, Article 240 (1) provides that, ‘ Ghana shall have
a system of Local Government and administration, which shall as far as practicable, be
decentralized’ . The Constitution further provides that:
i. Parliament shall formulate laws to enhance the capacity of Local Government
Authorities to plan, initiate, co -ordinate, manage and execute policies in respect of
matters affecting the local people within their areas.
ii. There shall be established for each Lo cal Government unit a sound financial base with
adequate and reliable sources of revenue.
iii. To ensure accountability of Local Government authorities, people in particular local
government areas shall, as far as practicable be afforded the opportunity to part icipate
effectively in governance.
The Local Government Act, 1993 (Act 462) was passed to outline in practical terms the political,
administrative and fiscal mandates of the Metropolitan, Municipal and District Assemblies
(MMDAs) in their areas of jurisdic tion.
Act 462 seeks to establish decentralized administration through the transfer of power, authority,
functions ,competence and means from the Central Government Ministries, Departments and

32
Agencies (MDAs) to local government (LG) units, specifically i.e the Metropolitan, Municipal and
District Assemblies (MMDAs) for improved service delivery to people. Below is the structure of
the local government structure.
Structure of the new local government system
The Structure of the new local government system is a four -tier metropolitan and a three -tier
Municipal/District Assembly system.
Figure 2.1

DISTRICT
ASSEMBLIES METROPOLITAN
ASSEMBLIES REGIONAL
CO-ORDINATING
COUNCILS
SUB-METRO DAS MUNICIPAL
ASSEMBLIES
URBAN/TOWN/AREA
COUNCIL ZONAL COUNCILS TOWN COUNCILS
UNIT COMMITTEES

33
The new local government system is made up of a Regional Coordinating Council (RCC) and a
four-tier metropolitan and three -tier municipal/District Assembly(DA) structure .

Composition of structure
The RCC consists of the regional minister as chairman and his deputies, the presiding member of
each DA and the district chief executive of each district in the region, two chiefs from the regional
house of chiefs and the decen tralised ministries without voting rights.

A DA consists of the district chief executive, two- thirds of the members directly elected by
universal adult suffrage, the members of parliament (MPs) representing constituencies within the
district, and not l ess than 30% of the members appointed by the president in consultation with
chiefs and interest groups in the district. The district chief executive is nominated by the president,
approved by two -thirds of the members of the DA present and voting, and appo inted by the
president. The assembly has a presiding member who is elected from among its members by two –
thirds of all the members of the assembly. The sub -district structures of the district assemblies
consists of the sub -metropolitan district councils in the metropolitan assembly areas, the zonal
councils in the municipal assembly areas, the urban, town and area councils in the metropolitan and
district assembly areas and the unit committees in all the metropolitan, municipal and district
assembly areas . Since their creation in 1988/89 based on a criteria, their descriptions have not
changed (Ahwoi, 2010)

34
• The sub -metropolitan DCs which consist of not less than 25 and not more than 30 members,
made up of all elected members of the assembly in that sub-metropolitan district and such other
persons resident in the sub -metropolitan district appointed by the president.
• The urban council consists of not less than 25 and not more than 30 members made up of not
more than eight persons elected from among the members of the relevant DA, not more than 12
representatives from the unit committees in the area of authority of the urban council and not more
than 10 persons ordinarily resident in the urban area.

• The zonal council consists of not less than 15 and n ot more than 20 members made up of not
more than five persons elected from among the members of the relevant municipal assembly, not
more than 10 representatives from the unit committees and not more than five persons ordinarily
resident in the zone.

• The town/area councils consist of not less than 15 and not more than 20 members made up of not
more than five persons elected from among the members of the relevant assembly, not more than 10
representatives from the unit committees and not more than five p ersons ordinarily resident in the
town or area.

• The unit committee consists of not more than 15 persons made up of 10 elected persons
ordinarily resident in the unit and not more than five other persons resident in the unit and
nominated by the distric t chief executive, acti ng on behalf of the president. Elections to all local
government bodies are on a non -partisan basis; the elections are state -sponsored and conducted by
the electoral commission.

35
Regional coordinating councils (RCCs)
RCCs are estab lished for each of the 10 regions of Ghana. An RCC is an administrative and
coordinating rather than a political and policy -making body. Its functions are to:

• monitor, coordinate and evaluate the performance of the DAs in the region;
• monitor the use of all monies allocated to the DAs by any agency of the central government;
• review and coordinate public services generally in the region
• perform such other functions as may be assigned to it by or under any enactment.

Metropolitan/municipal/distri ct assemblies
DAs in Ghana are either metropolitan (population over 250 000), municipal (one town assemblies
with populations over 95 000) or district (population 75 000 and over.) There are 6 metropolitan
assemblies, 55 municipal assemblies and 155 DAs. A metropolitan/municipal/DA is:
• created as the pivot of administrative and developmental decision -making in the district and is the
basic unit of government administration
• assigned with deliberative, legislative as well as executive functions
• esta blished as a monolithic structure to which is assigned the responsibility of the totality of
government to bring about integration of political, administrative and development support needed
to achieve a more equitable allocation of power, wealth and geogr aphically dispersed development
in Ghana
• constituted as the planning authority for the district.

36
Functions of the assemblies
These are deliberative, legislative and executive. Section 10(3) of Act 462 lists them as follows:
a) be responsible for the overall development of the district and shall ensure the preparation
and submission through the regional coordinating council for approval of the development
plan to the commission and budget to minister of finance for the district
b) formulate and execute plans, programmes and strategies for the effective mobilisation of
the resources necessary for the overall development of the district
c) promote and support productive activity and social development in the district and remove
any o bstacles to initiative and development
d) initiate programmes for the development of basic infrastructure and provide municipal
works and services in the district
e) be responsible for the development, improvement and management of human settlements
and the environment in the district
f) in cooperation with appropriate national and local security agencies, be responsible for the
maintenance of security and public safety in the district
g) ensure ready access to the courts and public tribunals in the district fo r the promotion of
justice
h) initiate, sponsor or carry out such studies as may be necessary for the discharge of any of
the functions conferred by this Law or any other enactment perform such other functions as
may be provided under any other enactment.
Sub-District Political/Administrative Structures. These being subordinate bodies of the
DAS, they perform functions assigned to them by the instruments setting up the assemblies

37
or delegated to them by the assemblies. They are constituted by the sub -metrop olitan DCs,
urban/town/zonal/areas councils, and unit committees.

Sub-Metropolitan District councils. These structures are immediately below the metropolitan
assemblies. There are 29 of these structures established by law. This arrangement has been dictat ed
by the complex and peculiar socio -economic, urbanization and management problems which
confront these metropolis (Accra, Kumasi and Sekondi metropolitan Assembly).

Urban Councils. Urban councils are peculiar to settlements of “ordinary” DAs. They are c reated
for settlements with populations above 1500 and which are cosmopolitan in character, with
urbanization and management problems, though not of the scale associated with the metropolis.
Thirty -four (34) of the these councils are established by law.

Zonal Councils. The zonal councils are in the “one -town” municipal assemblies of Cape Coast,
New Juaben, Tamale and Tema, for which the establishment of town/area councils will raise
problems of parallel administrative structures. There are 108 of such zo nal council for the
municipal assemblies. They are based on based on the electoral commission’s criteria of
neighbourhood Community of interest, population of 300 and identifiable streets land marks etc as
boundaries.

Town/Area Councils. These are found in the metropolitan assemblies and Das. In the Das, town
councils are established for settlements with populations between 500 and 1500. Area councils

38
exist for a number of settlements/Villages which are grouped together but whose individual
settlements have populations of less than 5000.
They cover areas with predominantly rural populations and in some cases can be identified with
spheres of influence of a particular traditional authority. They are essentially rallying points of
local enthusiasm in sup port of a new local government system.

Unit Committees. A unit is normally a settlement or a group of settlements with a population of
between 500 -100 in the rural areas, and a higher population (1500) for the urban areas. Unit
committees being in close touch with the people play the important roles of education, organization
of communal labour, revenue -raising and ensuring environmental cleanliness, registration of births
and deaths, implementation and monitoring of self -help projects among others.

Sub-District level Decentralization : Delegation .
The decentralization powers of the sub -district structures (Sub -metropolitan District Councils
(SMSCs) Urban/Zonal/Town Area Councils (UZTACs) and unit committees (UCs) are nature of
delegation only. They may take decisions on their own based on the functions and powers
conferred on them by law and delegated to them by the DAs but they do not take responsibility for
those decisions. Section 15 (1) of Act 462 puts the matter beyond doubt by providing that: Subject
to this Act, a District Assembly may as appropriate delegate any of its functions to such Sub –
Metropolitan District Council, Town, Area, Zonal or Urban Council or Unit Committee or such
other body or person as it may determine.

39
To ensure balanced growth, development and improved service delivery to the people, MMDAs
were further increased from 170 to 216 in 2012. Ghana has adopted a number of strategies in the
implementation of decentralization, notable among them include;
 Political Decentralizati on
 Administrative Decentralization
 Decentralized Development planning and programme implementation
 Fiscal Decentralization
 Decentralized management of public -private partnerships and External support for
Decentralization
Some major objectives that this decentralization programmes hoped to achieve are:
 Balanced development (poverty alleviation, redistribution of wealth and economic growth)
 More realistic projects and programmes
 More effective co -ordination of development activities at various spatial l evels
 Strengthening local political institutions and increasing people's participation in development
 Greater mobilization of local resources

40
2.2.0 Fiscal Decentralization
Fiscal decentralization constitute a major feature of intergovernmental finances in developing
countries (Bird 1999). It is important to examine the incentives created for both central and sub –
national governments. Fiscal decentralization refers to the devolution of authority for public
finances and the delivery of government services from the national to sub -national levels.(Tanzi
1996). According to Ahwoi (2010), fiscal decentralisation is the method by which the decentralised
local governments translate power and competence into the resources with which they perform the
transferred functions.

2.2.1 Guiding Principles Of Fiscal Decentralisation
The principle of fiscal decentralisation is that ''the finances follow the functions''. This means that
whenever a function is transferred, the resources with which the function was being performed must
be transferred along -side it. According to Vo (2008), fiscal decentralisation can be viewed in terms
of four interrelated levels.
1. Assignment of expenditure responsibilities
2. Assignment of tax and revenue sources
3. Intergovernmental fiscal transfers
4. Sub-national borrowing

41
2.2.1.1 Assignment of expenditure responsibilities
The first basic question to ask is who does what or what does what. Which functions should be
assigned to which levels of government. Functional expenditure assignment s should be clear and in
accordance with the principles of "subsidiarity". This principle suggest that government decisions
should always be taken at the lowest possible level or closest to where they will have their effect.
Oates (1972 & 1999) identified three major functions of assignment of expenditure responsibilities.
These are
 Macroeconomic stabilisation
 Income redistribution
 Resource allocation

Macroeconomic stabilisation
Monetary and fiscal policies are the two main instruments of macroeconomic policy. Fiscal policy
refers to the control over the amount and structure of taxes and expenditures, and the management
of the budget deficit or surplus. It is a powerful instrument for stabilising the economy.
Since sub -nationals may not have the incentiv es to undertake economic stabilisation policies , the
stabilisation function is usually on the central government. This is partly so because sub -national
income constitute large transfers from central government and sub -nationals are directed to the use
of the income.

42
Resource allocation
Resource allocation is effective when the provider of such resources are closer to the people to
know what their needs are. Th e role of local government in th e allocation function is of great
importance since it is not li kely for the demand of public services and goods to be uniform across
the country.
The allocation function proposes the argument that, each level of government may be more efficient
in the delivery of a particular public good or service and for that matter , sub -national level should
be made to provide such service. Being closer to the people, it is deemed that sub -national
governments can easily identify people's needs and thus supply the appropriate form and level of
public service (Enemuo 2000; Rondinelli et al, 1989).
In contrast to these theoretical arguments, there are several obstacles that can be identified.
Prud'homme (1995) put forward three (3) main arguments against the model of fiscal
decentralisation in developing countries. First, developing co untries basic problem is to satisfy
basic needs rather than to reveal differences in taste and preference. Second, the fiscal
decentralization model assumes that voters in each jurisdiction will express their interest and
preference through the ballot box (voting). However, Prud'homme argued that developing countries
democracy is at its enfant stage and thus the menus offered for choice are unlikely to express the
electorate's preferences. Finally, there is a gross mismatch between available resources and
promised expenditure. Therefore, elected officials lack the incentive to fulfil their promises.
Martinez -Vazquez, McClure and Vaillancourt (2006) noted that there are four (not exhaustive)
criteria to assess the assignment of functional and expenditure resp onsibilities. These are:

43
economies of scale, the presence of externalities, heterogeneity of preference and of circumstances
and emulation
 Economies of scale vary across goods and services and size of jurisdiction. The existence of
significant economies of scale constitutes an argument for a higher level of government to
provide a particular good or service.
 The presence of externalities : provision of a good or service may have spill -over effects
beyond a particular jurisdiction. The presence of external ef fects is a consideration in
determining the optimal -sized group to serve a particular good. As Oates (1972) indicated,
the smaller the group, the less the external effects are likely to be internalised and the greater
the externalities, a higher level of government provision is desirable.
 Heterogeneity of preferences and of circumstances : when there is the existence of
heterogeneity of preferences among geographical subsets of the total population, welfare
would be maximised if each local government satisf ies the unique preferences of its citizens
by providing a particular good or service tailored to citizen's preference instead of uniform
provision of a good across the region or country by the central government.
 Emulation: it refers to completion, which facilitates introducing best practices in
government, requires two or more jurisdiction involved in a given activity; an argument for
decentralising government activities.
2.2.1.2 Assignment of tax and revenue responsibilities
The second basic question is, what revenue sources are assigned to sub -national government? That
is who levies what taxes. Some taxes are best suited for local governments to collect whiles others
are better left for national governments. Governments rely solely on tax revenue for its

44
developmental needs. Once sub -nationals have been assigned expenditure responsibilities,
obviously, it has given rise to finance responsibilities. Broadway et al (2000) noted that there is no
ideal assignment of taxes between national and sub -national, h owever, a set of ''tax assignment
rules" has been developed in the traditional with wealthier regions being able to collect more
revenues than poorer ones. In these cases equalisation support of other intergovernmental fiscal
transfer schemes become very n ecessary to ensure that sub -national government have adequate
revenues to fulfil their expenditure responsibilities
2.2.1.3 Intergovernmental fiscal transfers
Intergovernmental fiscal transfers are often necessary since sub -nationals are unable to raise
sufficient revenue to fund their expenditure responsibilities. Transfers of grants are usually from
higher level to lower governments for the provision of public goods and services. These transfers
should create incentives for sub -nationals to raise more r evenue to fund their activities.
De Mello (2000) asked two important questions: whether decentralised fiscal policy making leads
to a deterioration of sub -national finances and whether such deterioration worsens the fiscal
position of the central governmen t. The first question addresses the issue of whether fiscal
decentralization creates incentives for sub -national wasteful spending. The second question has to
do with the macroeconomic repercussions of worsening decentralization driven sub -national budget
imbalances.
Transfers are widely used for a wide variety of purposes:
 Vertical fiscal balance – providing additional resources to local level so that there is a
balance between the fiscal needs and resources available to different levels of government

45
 Hori zontal fiscal balance – ensuring fiscal balance in resource allocations between
government units of the same level of government
 Funding of specific national priorities
These transfers can also be used to compensate sub -natioanl governments for complying wi th
central government's mandates or central government programmes that are delegated to the sub –
national levels. Again the transfers could also take the effects of inter -regional spill -overs or
externalities.
How to resolve the imbalance between the revenues and expenditure
Vertical imbalance
The basic rationale for a system of transfer is the existence of a fiscal gap at the local government
level arising out of own -revenue and own -expenditure assignments. There are a number of methods
to close the f iscal imbalances of sub -national governments. These are revenue sharing, grants and
macroeconomics aspects of fiscal decentralisation (Ahmad 1997).
Revenue sharing
Based on the above ''assignment rules" of generating revenue, the central government shoul d keep
the major taxes such as corporate income taxes, value added tax. This is to ensure that the central
government continuously fill the vertical fiscal gap by the transfer of resources to local
governments. The duty of the local government may be to as sist in local revenue mobilisation by
providing information on local tax payers thereby increasing the tax net.

46
Grants
Apart from revenue sharing , central government grants usually fill the gap between local
government revenue and expenditure. Grants c an also be used to encourage local expenditure on
service of national importance such as vaccination campaigns, anti -bush fire campaigns or general
public education. Grants may be released as "tied", "untied" or "matching" grants (Ahwoi, 2010).
 Tied or co nditional grants are programmed or carry conditions regarding the use of the
grant. Such grants are often based on minimum standards of service to be defined by the
sector ministries in negotiation with representatives of sub -national governments. The
cond itionality refers to earmarking the finance to a particular service such as primary
education, primary health care, water supply, agriculture and roads. Wolman (1990)
indicated that tied grants, limits the autonomy of sub -nationals which defeats fiscal
decentralisation.
 Untied or unconditional grants are used at the discretion of the local authority. That is, they
are for gen eral purposes. In Ghana for instance, the 1992 constitution provides that at least
5% (now 7.5%) of the national revenue should be mad e available to the MMDAs for
development projects and programmes. These funds are lodged into one pool of funds
referred to as the "common fund" (Brosio, 2000).
 Matching or equalising grants are to supplement finances provided by the local authority for
specific purposes and are often used as incentives to mobilise local revenue.

47
Macroeconomic aspects of fiscal decentralisation
It is important in the process of fiscal decentralisation to be aware of the risks for macroeconomic
management and fiscal dis cipline. In a bid for central government to carry out its stabilisation and
macroeconomic stability through the budget, it is important for government not to assign substantial
revenue and expenditure responsibilities to sub -nationals. The destabilising po tential of sub –
national governments' is greatest when they face no hard budget constraint. (World Bank, 2000).
Since governments can call for bail out, when they are in financial crisis, this may give rise to
resource wastage within the sub -national govern ments. Bird and Vaillancourt (1998) noted that
strict limits should be imposed on the borrowing ability of sub -national government. In Ghana, the
borrowing limit is ¢20,000,000 (GH¢2,000) (Ahwoi, 2010).
However, there are calls for a formula – based revenue sharing and other transfer systems in order to
promote stability and transparency. Many developing countries including Ghana are currently
shifting from totally discretionary methods to formula -based systems of allocation from the centre
to sub -national g overnments. In Ghana, the Common Fund formula uses five main factors as inputs:
"equality, population density, service pressure, development status, and incentive" factors (Ahwoi,
2010). Also another major development fund, the District Development Facilit y (DDF) which is
donor driven uses the Functional Organisation Assessment Tools (FOAT) to assess MMDAs who
qualify for such grants.
In the view of Brosio (2000), the major problem surrounding African countries seems to be (i) the
frequent changes in the al location formula; (ii) use of variables reflecting discretionary policy
choices made by the recipient sub -national government (iii) little attention paid to equalisation and
(iv) few incentives to increase own revenue generation by lower level governments.

48
In the Ghanaian system, there is transparency and efficiency in the allocation of resources from the
central government to MMDAs. The DACF formula is debated in Parliament before it is approved
(Ahwoi, 2010). Again, the DDF is a performance based grant an d as such if an MMDA does not
qualify based on the minimum conditions will not be given such grants.

Horizontal imbalance
Horizontal fiscal balance ensures that there is fiscal balance in resource allocations between
government units at the same level of governments. The problem with this system has to do with
the fact that geographical areas usually differ with respect to resource capacity and needs. Wolman
(1990) noted that the needs for public services may differ because some areas for instance have a
higher percentage of school children and or elderly people than others. In Ghana, the formula of
sharing the DACF includes such factors "service pressure and population density" factors.
The W orld Bank (2000) identified two factors irrespective of if fisca l decentralisation is a positive
force in an effort to alleviate poverty or it aggravates differences among sub -national areas of
operations. These are the horizontal equity and the within state equity. Whiles the "horizontal
equity" deals with the extent to which sub -national have the fiscal capacity to deliver an equivalent
level of service to their population, the" within state equity" is the ability and willingness of sub –
national governments to improve income distribution within their borders.
In a bid to correct these imbalances will require the efforts of both the central and sub -nationals. To
secure national standards levels of providing public goods and services to alleviate poverty and
income redistribution, the main responsibility should rest wit h the central government (World Bank
2000).

49
2.2.1.4 Sub -national Borrowing
Borrowings enables local government to spread the cost of projects such as local infrastructure over
time. Local government borrowing usually take the form of sale of bonds in private capital markets,
often with central government approval and guarantees on -lending of central government
borrowing, creation of special municipal credit institutions, straight forward bank borrowing often
subject to central government ceilings (Ahwo i 2010).
However, local borrowing can be constrained by lack of local government credit worthiness
especially amongst rural local government. The World Bank (2000) noted that, the destabilising
potential of sub -national governments is greatest when they f ace no hard budget constraint. The
presence of a well -defined local government for borrowing and issuing of bonds is crucial in order
to assure a hard budget constraint for local governments. A hard budget constrained means that the
national /central gove rnment will not bail out local government for excessive debt under any
circumstances. Unless local borrowing is appropriately addressed and regulated , local governments
might end up over extending themselves financially and end up in arrears.

2.3 Incentive Approach To Fiscal Decentralisation
Incentive compatibility is the core property of a good measurement scheme. A scheme is called
incentive compatible if it completely eliminates potential incentive misalignment problems. That is,
under such a scheme each manager finds it to his or her interest to follow the optimal decision rules
for the system as a whole (Lee and Whang, 1999). In mechanism design, a process is incentive –
compatible if all of the participants fare best when they truthfully revea l any private information
asked for by the mechanism ( Vleugels, 1997).

50

The fiscal literature suggests that it is not possible to ensure incentive compatibility simultaneously
with optimal allocation of resources and a balanced budget in the provision of public goods. In the
absence of incentive constraints, an optimal fiscal system would equalize the marginal utility of
taxation with the marginal utility of consumption of local and national public
goods. Contrasting decentralization in Hungary, one of t he most decentralized countries of central
and Eastern Europe, and in Slovakia, one of the least decentralized during the decade of
transition from socialism to market , Dethier (2000) noted that the Hungarian and Slovak
experiences show that, even when exp enditure assignments and accountability rules in
intergovernmental affairs are specified by legislation, in practice, major expenditure management
and public accountability issues still arise. He noted that the role of incentives in determining how
local o rganizations like schools operate is crucial.

Public management expenditure is however costly when there is the presence of incentive
constraints. The problem then becomes one of supply of public good and optimal taxation in the
presence of information co nstraints. The literature on governance stresses the constraints imposed
by the political system. Thus the provision of the public good has to be recognized as both a
political process and a budget process (Laffont 1988)

First-generation theory of fiscal decentralization believes that, market failure occurs in the provision
of public goods and services with positive externalities, which is usually called "tragedy of the
commons" (i.e. because property rights of public goods are difficult to define, they a re usually over –
used or encroached). So the government should enter these areas, and correct these market failures

51
through appropriate policies. More so, the first -generation theory of fiscal decentralization believes
that the beneficiaries of a programme are all of the citizens in the region, and the local governments
could understand local conditions better than central government. Therefore, providing local public
goods by local governments will make local citizens “better -off” than providing local publi c goods
uniformly by the central government.

However, second -generation theory of fiscal decentralization believes that appropriate incentive
mechanisms must be designed to ensure that local government has sufficient incentives to provide
efficient public goods and public services (Oates, 2005; Qian and Weingast, 1997). The largest
difference between second -generation and first -generation theories of fiscal decentralization is that,
second -generation theory holds the thinking that governments are not pure “Guardians of Public
Interests”, they concern about their own private interests, and behaviour distortions may occur if
there is no restriction for local officials. Therefore, an efficient government structure should fulfil
the incentive compatibility betw een local governments and local citizens’ welfare. But without
appropriate incentive regime constraints, citizens can not enjoy benefits of fiscal decentralization,
but are “worse -off” because of distorted behaviours of local governments (Luo, 2010).

In Ghana there is little incentive put in two of its major development grant (DACF & DDF) to
encourage local government to mobilise local government. Setting the right incentives for LGs to
collect taxes (and other own -source revenues) has been a major challe nge. The DACF has an
incentive factor as explained above ( 2.8.2.1 ). The DDF has incentive to enhance the fiscal
capacity of MMDAs. It includes incentives such as efforts to improve internally generated funds the
growth of absolute size of IGF (growth shou ld not be less than 10%), the cost of collection of IGF

52
(the cost of collection should be less than 30% of total IGF) , the IGF used for development
(investment) expenditure (at least 15% or more of the IGF should be spent on investment).

2.4 Arguments i n favour of fiscal decentralisation
The modern case of fiscal decentralisation arguments has been classified by Wolman (1997) under
two headings "efficiency and governance values"
Efficiency values
In Wolman's opinion, ''efficiency is an economic value seen as the maximization of social welfare''.
In a sector regulated by demand and supply there is price signal differences between the public and
the private sector. Political lines are the bases for the allocation of public goods and services.
Notwithstanding, there is a ''divergence between the preferences of individual community members
and tax and service packages reflecting the aggregate community preferences". Kee (2003) in
Ankamah (2012) therefo re reiterate the fact that, "since such divergence reduces social welfare", it
would be more favourable to hold those to a minimum and this will make the marginal in local
areas (e.g districts) than in larger, more heterogeneous areas (e.g nation)
Govern ance values
Governance values includes responsiveness and accountability, diversity and political participation
(Wolman 1997). Since decentralisation places much emphasis on assigning decision making closer
to the people, it is important to promote greater ''responsiveness'' of local officials with its associate
greater "accountability" to the citizens. This is sub -nationals are expected to be more

53
knowledgeable about the problems and needs of their local jurisdiction than central government. In
addition , accountability through local level elections are seldom focused on local service delivery.
On other argument for fiscal decentralisation put forward by Tiebout (1956) is that, since there is
diversity in public policy, it offers citizens a greater choice i n public services and tax options when
they want to decide on where to settle. This serves as a platform of innovation for both central and
sub-national governments in making future implementation decisions. Notwithstanding that there is
no theoretical rea son why central government could not be diverse in its solutions, there is pressure
to make central government to make it policies and procedures as uniform as possible.
As Kee (2003) indicated, fiscal decentralisation is seen as a model that promotes demo cratic
participation at the grass root of sub -nationals of government. This enhances political participation
at the sub -national level. It also provides the platform to enhance democratic values and political
stability at the sub -national level as this can be a breeding grounds for future political leaders.

2.5 Arguments against fiscal decentralisation
Notwithstanding the benefits and calls by the International Development Agencies for fiscal
decentralisation, many scholars including Tanzi (1995) and Prud 'homme (1995) have called for
precautionary notes that need to be considered especially in developing countries. Tanzi for
instance argues by raising a number of issues where fiscal decentralisation could be a shortfall:
i. Tax payers may have insufficient in formation or no political power to pressure local policy
makers to make resource -efficient decision

54
ii. Local politicians may be more corrupt than national politicians or at least find themselves in
a more corrupting situation
iii. The equality of bureaucracies is likely to be better than local bureaucracies
iv. Technological change and increased mobility may reduce the number of service that are
truly local in nature
v. Local governments often lack good public expenditure management systems to assist them
in their tax an d budget choices
vi. Fiscal decentralisation may exacerbate a central governments' ability to deal with "structural
fiscal imbalance"
Prud'homme (1995) also finds faults in the fiscal decentralisation model. Prud'homme suggestion
that fiscal decentralisation b e adopted in countries where there are roughly uneven regional
capabilities is uncommon in many countries. He also put forward that since the poor in developed
and higher income regions to be better off than their counterpart in the less developed and low
income areas, the redistribution of national income should be left with the central government and
not the sub -national. He also argued that whereas assigning the revenues responsibilities to sub –
national to tax the rich and redistribute income to the poor , the rich will end up migrating from the
regions where such policies are imposed to such areas where the tax policy favours them making
the poor in such areas to be poor for good making the model "self defeating".
Much as McClure (1995) agrees with Prud'h omme that central government should retain sufficient
revenue, for effective stabilisation and redistributive roles, he however disagrees that there is no
pure decentralisation as put forward by Prud'homme and therefore reiterates that it is rather some
functions that are decentralised.

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2.6 Fiscal decentralisation in Ghana
The following legislative instruments have been issued to operationalise fiscal decentralization:
i. Local Government Act 1993 (Act 462)
ii. District Assemblies Common Fund Act, 2003 (Act 455)
iii. Public Procurement Act, 2003 (Act 663)
iv. Audit Service Act, 2000 (Act 584)
v. Financial Administration Act, 2003 (Act 654)
vi. Financial Administration Regulations, 2004 (LI 1802)
vii. Internal Audit Agency Act, 2003 (Act 658)

2.7 District Assembly's Financial Resources
Kanzentet (2011) identified three main sources of financial resources available to district
assemblies in Ghana.
i. Internally Generated Fund (IGF)
ii. Inter -governmental fiscal transfers
iii. Other financial arrangements
2.7.1 Internally Generated Funds (IGF)
Internally generated funds are basically the own -sourced revenues by district assemblies. The sixth
schedule (section 86) of the Local Government Act, 1993 (Act 462) lists revenue of local
government bodies. These inclu de

56
i. Entertainment Duty under the Entertainment Duty Act, 1992 (Act 150)
ii. Casino Revenue under the Casino Revenue Tax Decree, 1993 (NRCD 200)
iii. Betting Tax under the Betting Tax Act 1965 (Act 268)
iv. Income Tax (Registration of Trade, Business, Profession or Vocat ion) law, 1986 (P.N.D.C.
L 156)
v. Gambling Tax under Gambling Machines Decree 1973 (NRCD 174)
vi. Rates and levies levies on crops other than cocoa, coffee, cotton and shea nut
vii. Fees
viii. Licences
ix. Taxes chargeable on the income of self -employed persons
x. Other miscella neous receipts
Act 465 further empowers local governments to raise internal revenue to finance their development.
They are mostly generated from their area of jurisdiction and the district assemblies have the
autonomy to use the funds without discretion. T he more IGF that a district assembly is able to
generate the more powerful and autonomous such a district assembly will be. Basically, there are
six main sources of revenue that a district assembly can tap from: rates, lands, fees, licences, rent
and inves tment income (Ankamah, 2012).
Rates
Section 94 of Act 462 makes the District Assemblies the rating authority. The district assemblies
have the duty to make sufficient rates to cover the total estimated expenditure such rates are to rake
in. The DA may make general rates or special rates. A "general rate" is a rate made or levied over
the whole district for the general purposes of the district. For example, "property" or "possession"

57
rates. A "special rate" means a rate made and levied over a specified area in the district for the
purpose of a specified project approved by the DA for that area.
Fees and fines (charges), rent
Section 34 of Act 462 empowers the DAs to charge fees. It provides such guidelines in respect of
the charging of fees as may be prescribed by the Minister by a legislative instrument. Schedule six
of the local government act list some of these areas where fees may be charged:
i. Cattle
ii. Slaughter house
iii. Market dues
iv. Market stalls/stores
v. Lorry pack dues
vi. Trading kiosks
vii. Chop bars
viii. Corn mills

Licences
By section 76 of the local government act, a district assembly may issue licences for a host of items
and activities. They include the following provided under the sixth schedule:
i. Dog licence
ii. Hawkers
iii. Palm wine sellers

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iv. Akpeteshie sellers
v. Herbali st
vi. Taxi cabs
vii. Self employed artisans
viii. Petroleum installation

Investment income
Assemblies may undertake trading activities from which revenue is earned. They may engage in
tractor services, grader operations or transport businesses.
Despite the revenue sour ces available to the DAs, as legislated to harness the IGFs, Inanga and
Osei-Wusu (2004) identified four(4) major challenges faced by the DAs. First, tax bases of local
governments are static because of weak data bases for determining revenue potentials. A reas within
the districts where revenue could be generated are not well identified and therefore the revenue
collection levels are not optimal. The second issue has to do with the complex structures in terms of
planning for revenue collection in some distr icts. The third problem identified is weak and
ineffective mechanisms for collecting internal revenue. For instance, the land valuation board does
not have adequate resources to carry out its responsibility to consistently value and revalue
properties. Thi s makes collection of property rates to be low. The last problem they identified is the
absence of appropriate sanctions or punishment for tax defaulters. Most residents especially traders
do not feel obliged to pay taxes.
There is therefore the need for DAs to devise strategies and practices which will work best for them
amidst these challenges to endure that they are serious about increasing their IGF collections.

59
2.7.2.0 Intergovernmental Fiscal Transfers
These transfers include DACF, recurrent expenditure transfers and ceded revenue (Inanga and Osei –
Wusu 2004). Another major grant is the District Development Facility (DDF) which is performance
based using the Functional Organization Assessment Tools (FOAT).

2.7.2.1 District Assemblies Commo n Fund (DACF)
The 1992 constitution article 252 provides for the establishment of a district assemblies common
fund (the common fund). The object of the common fund is to provide additional resources for
development. Article 252 further provides that there shall be annual allocation by parliament not
less than five(5%) per cent (now 7.5%) of the total revenues of Ghana and payable in quarterly
instalments for development. Where "total revenues of Ghana" refers to as "all revenue collected by
or accruing to the central government other than foreign loans, grants, non -tax revenue and
revenues already collected by or for DAs under any enactment in force". The distribution of the
fund is based on a formula approved by Parliament before disbursement to the distri ct assemblies
can proceed (Osei – Akoto et al 2007). In theory, there is no control on the usage of the funds but
guidelines have been issued to limit the spending freedom of DAs (Appiah et al, 2000)
Since the inception of the DACF, five (5) factors have be en considered in the calculation of the
district's shares of the common fund(Ahwoi,2010). These are described as "equality", "population
density", "service pressure", "development status" and "incentive" factors. The equality factor
simply stipulates which percentage of the common fund is to be distributed evenly among all the
districts irrespective of size or population. The population density factor considers how populated
an area is. The greater the population the more fund (or percentage) the assemblies receives.

60
Service pressure factor is a measure of how much use the facilities in a district. Therefore, the
more populated a district is, the more pressure to provide services by the assembly. Development
status factor measures the development status of t he district. The more developed a district is the
less funds it receives. The incentive factor is there to motivate assemblies to work harder at local
revenue mobilization since it was realised that with the inception of the fund, assemblies relaxed in
their effort to raise local revenue and tended to rely more on the common fund. Under this factor, an
increase in locally mobilised revenue in real terms relative to a given base year results in an
increase in allocation , whilst a no increase or a decrease r esults in a zero percent allocation.
2.7.2.2 Recurrent Expenditure
These are salaries and other remuneration including pensions of staff of the assemblies, provided
these fall within the approved manpower ceilings of the assemblies. Other operational and
administrative expenses of the assemblies were also transferred to the DAs under the original
decentralisation programme and were categorised as "untied" grants. Central government has since
1992 resumed full responsibility for these recurrent expenditure (Ahwoi 2010)
2.7.2.3 Ceded revenue
Ceded revenue was derived from revenue sources hitherto were tapped by the central government
through the internal revenue service but which the central government "ceded" to the assemblies.
These are listed in the si xth schedule of the local government act and they include: entertainment
duty, casino revenue, betting tax, gambling tax, income tax and advertising tax.

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2.7.2.4 District Development Facility (DDF)
Although over the years, there has been a gradual in crease in the volume of fiscal transfers to local
governments, this increase has not always been in line with the growing demand for services. At the
same time, the potential for Internally Generated Funds (IGFs) as a source to finance service
delivery has also not been fully exploited. Also, the increase in investment flows has not always
been met with adequate resources for maintenance. MMDAs are thus faced with a financing gap
that hampers their overall performance and the implementation of their develop ment plans in
particular. In response, MMDAs have been regularly agitating for an increase in the resources
transferred to them.
The performance of the MMDAs is further constrained by numerous administrative, reporting and
implementation arrangements assoc iated with “projectised” financial and/or capacity building
support from Development Partners. This situation poses increasing concerns about the financial
management capacity of MMDAs and the judicious and efficient use of resources at the district
level. These concerns have affected the granting of greater budget autonomy to MMDAs. In this
respect, the lack of linkage between performance assessments and additional funding is of special
concern to the central government and its development partners.
In or der to bridge the financing gap and to improve the performance of the MMDAs, the
Government introduced a performance based grant system (the District Development Facility)
where access to additional development funds is linked to regular performance asses sment under
the Functional and Organisational Assessment Tool (FOAT). . The DDF is jointly financed by the
Government of Ghana, AFD and three other Development Partners namely CIDA, DANIDA and
KFW. The government and its key development partners supporting decentralisation have

62
earmarked part of their support for the implementation of the performance based funding to
MMDAs. Under this system, good performance is rewarded with additional financial resources,
while weak performance is responded to by tailor -made capacity building support. The Performance
Based Grant System has three components (performance assessment, funding and capacity
building) which are designed as harmonised modalities, fully operating within Government’s
existing legal, regulatory and policy frameworks. The Facility is discretionary and funds are not
earmarked or tied to specific sectors. MMDAs use it to finance their Annual A ction Plans which
include the provision of basic school infrastructure and san itation facilities, markets, CH PS
compounds, rehabilitation of roads and the provision of water through boreholes. The Facility also
provides resources to train MMDA core staff o n procurement, financial regulations and accounting,
revenue mobilisation, documentation and records management among others. The disbursements of
development funds to the MMDAs under the District Development Facility (DDF) are based on
fulfilment of Minim um Conditions from the outcome of the annual assessment (FOAT).
The objectives of the DDF based on FOAT are to:
 enhance the role of the MMDAs in achieving the MDGs through the provision of
additional investment fund
 introduce a performance incentive stru cture in the MMDAs system.
 harmonise implementation modalities and administrative requirements currently
associated with projectised capacity building and capital support for MMDAs into one
coherent system, fully anchored in GoG’s legal and regulatory fra mework.

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The FOAT is part of the Performance Based Grant S ystem (PBGS) that has been developed to
provide well -coordinated institutional and financial support to the MMDAs. The system comprises
three interlinked components:
1. Performance Assessment (FOAT)
2. Funding (DDF)
3. Capacity Building
In this system, the performance assessment has a dual function – it informs the annual allocation
under the DDF as well as identifies capacity building needs for individual MMDAs. The MMDAs
are assessed in the following bro ad areas:
1. Management and Organisation
2. Human Resource Development
3. Planning and Budgeting
4. Financial Management and Administration, Accounting and Auditing.
Because the assessment takes place using a common set of indicators, it generates a systematic
body o f data that allows for a comparison of performance among the MMDAs. The availability of
this type of data will also provide an opportunity to strengthen the policy dialogue on
decentralisation and local government reform by giving it a more factual basis.
The incentives approach is reflected in the structure of the grant, which has three components:
1. A Basic Grant (40% of the overall pool) ;
2. A Performance Grant ( 40% of the overall pool);
3. A Capacity Building Grant (20% of the overall pool).

64
The Basic Grant is allocated on the basis of a simple formula, comprising an Equal Share,
Population and Land area factors (the size of the MMDA territory). The weighting of the factors
and the sharing are as follows:
• Equal Share (40%): shared equally to districts that fu lfilled all the Minimum Conditions.
• Population (50%): shared based on the proportion of a district’s population to the total
population of MMDAs that fulfilled all the Minimum Conditions.
• Land Area (10%): shared based on the proportion of a district’s la nd area to the total land
area of districts that fulfilled all the Minimum Conditions.
The Performance Grant is allocated as an addition to the Basic Grant for districts which fulfilled
all the Minimum Conditions. The amount allocated to each district is the ratio of a district’s score
to the total score of districts that met the Minimum Conditions as a product of the total performance
allocation which is 40% of the DDF Pool.
A crucial feature of the FOAT is the difference between Minimum Conditions (MCs) and
Performance Measures (PMs) . The MCs constitute the basic prerequisites that must be fulfilled
by MMDAs in order to receive the Basic Grant of the DDF, with the score on the performance
measures for the MDMAs that have met the MCs determining the performance Grant. Any MMDA
that fails to mee t any of the MCs will not receive any development funds namely the Basic and the
Performance Grants of the DDF pool for the year the assessment results are to be used for
disbursements.
The Capacity Building Grant are used to finance capacity building s upport as well as the cost of
the performance assessment itself. Through the capacity building support the MMDAs will thus be
given the opportunity to address institutional weaknesses, logistics needs and skills inadequacies in

65
their operations in a regula rised and well -coordinated manner. Twenty percent (20%) of the annual
overall resource pool will be ring fenced to finance the annual assessment and the capacity building
support under the system. It is important to note that the actual allocations made u nder the DDF are
dependent on the size of the overall pool. The management of the system is anchored on
institutional arran gements at the national level ( MLGRD operational manual for the implementation
and administration of the DDF, 2009)

2.7.3 Other fina ncial arrangement
Apart from the two main sources of revenue available to the district assemblies( IGF and Inter fiscal
transfers) other financial arrangements are available to finance capital expenditures. Such financing
arrangement could be statutory pr ovisions, or partnerships with other institutions or DA self –
initiative. These include borrowings, investment funds and non -monetary arrangement that include
community contribution (Inanga and Osei -Wusu 2004)

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CHAPTER THREE
METHODOLOGY
3.1 Introdu ction
This section describes the research methods used in the study including the research design,
sampling techniques and data collection instruments, data sources as well as the methods of data
collection procedures, data handling, ethical concerns and highlights the limitations of the study.
3.2 Research Design
A research design provides a frame work for the collection and analysis of data (Bryman and Bell,
2007). Thus, it gives the researcher a detailed plan that should help to guide and focus the rese arch.
There are a number of research designs methods that can be employed. The case study method was
however adopted for this study which involves detailed and intensive analysis of a single case.
3.3 The Study Area
The Lambussie -Kami District is the youngest in the Upper West Region. It is the ninth district to be
created in the region. The district was created from the Jirapa -Lambussie District Assembly by
legislative Instrument LI 1849 in 2007 and inaugurated on the 29th February 2008. Like any other
district, it was created to make sure that the administrative and financial machinery of government
are decentralized to afford the people opportunities to participate in decision -making at the district
level. The Lambussie -Karni District Assembly exists primarily to improve upon the living
standards of the people through the effective and efficient mobilization and utilization of resources
through the direct participation of the people (beneficiaries) in a friendly environment and on a
sustainable basis.

67
In order that the assembly meets its vision and mission, it undertakes formulation, execution and
monitoring of plans and policies which meet the developmental needs of the people of the District.
It is also tasked to effectively co -ordinate all de centralized departments, sub -district structures , and
co-operate organizations, which all have a role to play in ensuring that there is sound financial base
with adequate and reliable sources of revenue in accomplishing its vision and mission.
3.4 Locati on and Size
It is located in the North -Western corner of the Upper West Region. Approximately, it lies between
Latitude 10.250 and 11.000 North and Longitudes 20.25 and 20.400 West. It covers a total land area
of 1,356.6sq.km and contributes about 6% of th e total regions landmass of 18,476sq -km. It shares
boundaries to the South with Jirapa District, to the East with Sissala West District, to the West with
the Lawra and Nandom Districts and to the North with Burkina Faso. The District, therefore, serves
as the National Gate way to Burkina Faso. The capital of the district is Lambusie which is about
92km from the regional headquarters, WA.. Other major towns in Lambusie -Karni district include
Hamile, Samoa, Billaw, Piina and Karni. The location of the Distri ct is strategic as its proximity to
Burkina Faso could enhance cross border trade and other mutual relationships in terms of exchange
of ideas for the development of the District. However, it also poses a tendency of influx of
foreigners, including Fulani herdsmen, spread of diseases, and cross boarder crime. Below is the
draft map of the District.

68
Figure 3.1: Draft Map of Lambusie -Karni

Source: LKDA DMTDP

69
3.5 Demographic Characteristics
3.5.1 Population
According to the 2010 Population and Housing Census, the District has a population of 51,654,
constituting 24, 952 males (48.3%) and 26,702 females (51.7%). However, with a growth rate of
1.7, the population was projected to about 54,350 in 2013, constituting 26,251 males and 28,099
females. The population of the District is basically rural without some basic amenities like
electricity and telephone services. Rural -Urban migration is therefore common in the District
especially during the dry season as majority of the people become unemployed a fter harvest.
Even though the youthful population is the largest age group (50.5%), the district has a very
significant population of children (43%). This composition of the population therefore requires
efforts to create employment opportunities for the y outh and provide more schools, play grounds,
and other child development facilities for the children population.

70
Below is a Table showing the age structure of the population.
Table 3.1: Age Structure of the Population
Age Group Both Sexes
All Ages 54,350
0-14 23,325
15-64 27,456
65+ 3,585
Age-dependency ratio 98.0
Child dependency ratio 85.0
Old age dependency ratio 13.1
Source: GSS, 2013 as presented in LKDA MTDP
By implication from the table, each person within the active age group is likely to take care of 0.98
inactive person (0.85 child and 0.13 aged).
3.5.2 Ethnicity, Religion and Culture
The Lambussie -Karni District is made up of two main ethnic groups. These are Sissalas and
Dagaabas . Other ethnic groups found in the area include: Moshi, Waalas, Akan, Wangara, Gurunshi
and Fulani. The District has one Paramountcy with ten (10) Divisional and Thirteen (13) sub –
divisional chiefs. The chiefs and people of the District instituted an annua l Festival Known as
Mefele Gbero. The maiden celebration took place on the 29th of December 2009. The festival seeks
among other things to give thanks to God for good harvest and rally the people for development
initiatives.

71
Major religions practiced in th e area include: Traditional, Christian, and Islamic religions. Despite
the diversity in religion and tribe, there is a peaceful coexistence amongst various tribes and
religions. This makes the District relatively peaceful as there are no wide -spread chieft aincy and
land disputes.
Table 3.2: Religious Composition of Lambusie -Karni District
Religion Number Percent
Total 54,350 100
No religion 2,391 4.4
Christian 27,555 50.7
Islam 13,859 25.5
Traditionalist 10,435 19.2
Other 109 0.2
Source: LKDA DMTDP
The practice of elopement in the District is becoming a source of concern as the target for this
cultural practice is the girl child. This situation puts the girl child education in danger as their
education comes to an abrupt end.
The presence of Fulani herdsmen is a source of concern to many people in the District. Even though
they help in taking care of people’s cattle, their destructive activities are enormous.

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3.5.3 Migration
Migration is a prevalent phenomenon in the Lambussie -Karni District. Out -migration is common
among the economically active age group. Many of the youth migrate to the southern part of the
country and the regional capital in search of greener pastures. A co nsiderable number of people also
migrate to neighbouring districts and Burkina Faso. This development is largely due to the limited
economic opportunities in the District manifesting in the high levels of poverty among the people.
The out -migration among the economically active age group has the tendency of depriving the
District of the required manpower for a vigorous economic development. There is therefore the
need to accelerate economic development in the District to engage some of the youth in income
generating activities within the district.
The Lambussie -Karni District, due to its share of boundaries with Burkina Faso, serves as one of
the transit points for migrants from in the Sahel. There has been an influx of Fulani herdsmen into
the District in recent years. Steps are therefore necessary to control in -migration of foreigners into
the District and Ghana at large.
3.5.4 Human Settlement Pattern
The District is a rural farming community. Hence, the spatial distribution of the settlements
indicates a dispersed type population distribution. The dispersed nature of the settlements is mainly
due to land ownership where each settler stays some distance away from the other in order to have
enough farming land and curtail destruction of farmlands by livest ock.

73
3.5.5 Administrative Set -Up
The administrative Set -Up of the District Assembly consists of a secretariat headed by the District
Chief Executive who is the political head. The District Co -coordinating Director is the
administrative head and principal advisor to the District Chief Executive.
Figure 3.2: Structure of Lambussie -Karni District Assembly

Source: LKDA, 2013

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3.5.6 Composition of the District Assembly
The District Assembly is made up of 23 members, comprising of 15 elected, 7 government
appointees and 1 Member of Parliament (who is a non -voting member). The District has four (4)
area Councils at, Lambussie, Hamile, Samoa and Karni. Each of these Council s is composed of a
number of Unit Committees which form the lowest decision making level in the decentralization
process.

3.6 Sampling Techniques and Sampling Size
The study employed the use of non -probability sampling technique where members were selecte d
from the population in some non -random manner. The study specifically used the quota and
purposive sampling methods. The quota system was used to select the respondents from the four
area councils because of cost constraint -sample size of ten (10) each of rate payers was employed .
The purposive sampling method was used because of the purpose in mind so as to meet the
opinions of the targeted population quickly. The district has eleven (11) commission based
collectors and four (4) permanent collectors an d all of them were included in the study. The targeted
respondents are made up of three (3) groups: (i) key implementers of the decentralization process in
the district in enhancing collection of local revenues – DCD, DFO, DBO, Finance and
Administration (F &A) Sub Committee chairperson – as well as (ii) rate collectors (employed and
commissioned base) and (iii) rate payers in the sample population. Thus, the sample size of 60 was
considered for the study being made up of five (5) district assembly officials , fifteen (15) paid and
commission based collectors and forty (40) rate payers in the four (4) area councils.

75
3.7.0 Types and Sources of Data
The study employed both qualitative and quantitative methods to collect primary and secondary
data. Questionnair es and personal interviews were the main instruments used to collect both
primary and secondary data.
3.7.1 Secondary Data
The secondary data is based on a panel data from 2008 to 2014 extracted from annual financial
reports, minutes of F&A sub -committee meetings and fee fixing resolutions obtained from the DFO
to help answer some of the questions.
3.7.2 Primary Data
Primary data was solicited using structured interview, questionnaires and informal discussions with
colleagues at the assembly to fill in t he gaps.
3.8 Data Collection Procedure
The collection of data was done in two phases. The first phase was to solicit the views of the
revenue collectors who come to account for their collections and some staff of the finance and
budget unit informally. The second phase is to design and administer the questionnaire to my
respondents with the aid of two research assistants.
The questions were in three (3) sections for the three category of the respondents. The first section
which was for the staff of the dis trict assembly was to find out the flow of the intergovernmental
transfers of funds, the current IGF sources and what incentives are put in place to soar up IGF.
The second section which was administered to paid revenue collectors and commission based
collectors was to find out the motivation that are currently available to improve upon their

76
collections, challenges that they face and the untapped IGF sources. The third section was
administered to the rate payers to find out whether they have been paying rates and the type of rates
they have ever paid.

3.9 Data Analysis
The field data was collated, edited, coded and processed using Statistical Package fo r the Social
Science (SPSS). The data has been presented using descriptive statistics where graphs, frequencies,
tables, are used for analysis.
3.10 Reliability and Validity of Instruments
The reliability and validity of the interview protocol and the questionnaire were established first by
submitting the items to the research supervisor to make appropri ate modifications. Questionnaires
that were inappropriate were discarded and items that needed modifications as suggested by the
supervisor were corrected whiles appropriate ones were retained. The scrutiny of the instruments
and the items that followed th em helped to render the items appropriate enough to elicit the desired
data.
3.11 Ethical Issues
The researcher observed certain ethical principles in conducting this study. The principle of
voluntary participation and informed consent was observed. No re spondent was coerced to
participate in the study. The objectives and overall purpose of the study was also made known to
the respondents. The concepts of confidentiality and anonymity were guaranteed. All references
have been duly acknowledged to avoid p lagiarism.

77
3.12 Limitations of the study
The research is based on a time series data from 2008 to 2014. Relevant data was not available in
some cases. Secondary data gap had to be filled with primary data with some assumptions since the
current staff were not there at some particular time. Some tax payers were also unwilling to
participate in the exercise since they thought it will lead to them paying more levies. Using this
research work to generalise to other districts will be misleading hence the study is only
contextualised to the Lambussie -Karni District.

78
CHAPTER 4
RESULTS AND INTERPRETATION
4.0 Introduction
This chapter focuses on the analysis of data of LKDA financial reports for the research work and
other field data collected for the purpose of the study. Data to improve revenue mobilization will
also be discussed in this chapter as well as the incentives identified from intergovernmental transfer
of funds. As indicated in the methodology, data was sourced from three target groups; key
implementers of decentralisation process in the district in enhancing collection of local resources,
revenue collectors and rate payers. The data is presented separately as the information needs differ.
The data presented below was sourced from the key implementers of the decentralisation in
enhancing revenue mobilisation made up of the DCD, DFO, DBA, F&A member and an
Accoun tant in the accounts office.
The major sources of intergovernmental transfers of funds into the district include: District
Assemblies Common Fund (DACF), District Development Facility (DDF), Highly Indebted Poor
Countries (HIPC), Ghana School Feeding Progr amme (GSFP), and other donor funds made up of
Community Based Rural Development Programme (CBRDP) now Ghana Social Opportunities
Project(GSOP) and Sustainable Rural Water and Sanitation Programme (SRWSP).

79
Table 4.1: Which of these transfers have incenti ves for internal revenue generation?
Which of these transfers have incentives for internal revenue generation?
Frequency Valid Percent
DACF & DDF 5 100
GSOP 0 –
SRWSP
HIPC
GSFP
Total 0

5 –
Source: Field survey data, 2015
Table 1 illustrates those transfers that come with incentives to collect more IGF. The study found
out that only DACF & DDF have elements of incentives to collect IGF. The rest of the donor funds
are intervention programmes and do not have conditions attac hed to them in terms of revenue
mobilisation.
Table 4.2. What are those incentives for IGF generation?
What are those incentives for IGF generation?
DACF DDF Frequency Valid
Percent
Incentive factor
* absolute size of IGF
*efforts to improve IGF
*Collection cost of IGF
*share of IGF used for
development expenditure 5
5
5
5
5 100
100
100
100
100
Source: Field survey data, 2015

80
Table 4.2 shows the indicators that motivates the district to collect revenue. All the five respondents
agree that when there is increase in the IGF, the share of the common fund in the incentive factor
increases. However, there were unable to tell what wa s their revenue base for the measurement. In
the case of the DDF, all respondents were able to tell those indicators used to motivate the district
to collect revenue; this is because such assessment is done at the district level backed by evidence.
Indicat or 1 portrays the growth of the IGF. Where growth is equal or greater than 5% the score is 4
points. Also indicator 2 , portrays revenue improvement action plan. If there is a plan and 75% of
the activities in the plan have been implemented accordingly, the re is a score of 5 points is given. In
indicator 3 , the cost of collection should be 30% or less. The cost of collection is the sum total of
salaries of revenue staff on central government payroll, commission received by revenue collectors
including privat e collection agents and the cost of value books used. The last indicator 4 has to do
with the use of IGF for development (investment) and maintenance. At least 5% of the IGF should
be spent on investment and maintenance. Thus there is the need for the dist rict to generate more
revenue to meet such targets.
Table 4.3. Do you think these incentives are set to motivate a district like yours to collect more
IGF?
Do you think these incentives are set to encourage a district like yours to collect more IGF?
Frequency Valid Percent
Yes 4 80
No 1 20
Total 5 100
Source: Field survey data, 2015

81
From table 4.3, 4 out of the 5 respondents representing 80% think that those incentives are set to
motivate the LKDA to raise more IGF. Only 1 respondent representing 20% disagree that the
incentive targets set do not motivate the district to collect more IGF. The reason been associated
with the "incentive factor" in respect of the Common Fund which is not known by the district. This
means that for the district to incr ease their share of the Common Fund in the incentive formula the
district has to obtain from the administrator their revenue based used in the share of the Common
Fund.
Table 4.4. Has your district been meeting those incentives target?
Has your district b een meeting those incentives target?
Frequency Valid Percent
Yes 5 100
No 0 –
Total 5 100.00
Source: field survey, 2015
All the 5 respondents representing 100% agree that the district has been meeting the incentive
targets, particularly with regards to the DDF. They were however unsure of meeting the targets set
by the DACF. The district has also put in measures to maintain or improve upon these incentive
targets set under the DDF.

82
Table 4.5. In general what effects do you think intergovern mental transfer of funds have on
the district's initiative to collect its own revenue?
effects of intergovernmental transfer of funds on IGF
Frequency Valid Percent
encourage 2 40
discourage 3 60
Total 5 100.00
Source: field survey, 2015
From the table above, 2 respondents representing 40% think that intergovernmental transfer of fund
encourage the district to collect more IGF while the remaining 3 representing 60% disagree. Those
who disagree hold the view that those transfers do not encourage the district to collect more IGF
since the district over relies on these transfers to the detriment of IGF collection.

Table 4.6. How are rates fixed?
How rates are fixed
Frequency Valid Percent
In consultation with interest groups 5 100
Without the consultation of interest groups 0 –
Total 5 100.00
Source: field survey data, 2015
Table 4.6 above was to find out the autonomy of the district in setting rates and the level of
involvement of all stakeholders in setting rates. All the 5 respondents representing 100% do agree

83
that various rate payers are involved in the setting of rates for any given year. Usually the budget
committee meets with the various rate payers with proposals for discussion through meetings.
When there is a consensus, these rates are then forwarded to the general assembly for approval to
become a working document.
Table 4.7. Do you have rate payers register for all components of rate payers?
Do you have rate payers register for all components of rate payers
Frequency Valid Percent
Yes 1 20
no 4 80
Total 5 100.00
Source: Field Survey Data, 2015
Responding to the question of whether there is rate payers register, 4 out of the 5 respondents say
there is no rate payers register. This represents 80%. Only 1 respondent think that the district has a
register. This implies that the di strict do not keep tract of its rate payers. There could be tax evasion
by majority of the rate payers.
Table 4.8. What efforts has your district taken to widen the tax net?
Efforts to widen tax net
Frequency Valid Percent
Tax education 5 100
Collection of data on rate payers 0 –
Total 5 100.00
Source: Field Survey Data, 2015

84
Responding to this question all 5 respondents indicated that there have been tax education on -going
to widen the tax net. The district has also started the process of getting a tax payers data base of all
rateable items.
Table 4.9. Do you have stakeholders who help to collect IGF?
stakeholders involvement
Frequency Valid Percent
Yes 5 100
No 0 –
Total 5 100.00
Source: Field Survey Data, 2015
All 5 respondents say they have stakeholders who help them in the revenue mobilisation in the
district. These were identified as the chiefs, herdsmen and assembly members. They help by
gathering the people for some form of tax education before revenue collectors go round to collect
the revenue. This however applies to majority of livestock owners and basic rate payers.
Table 4.10. What are the main sources of IGF
The main sources of IGF
Frequency Valid Percent
Licence 5 100
Rates
Fees & fines
Rent
Land
investment 5
5
5
5
5 100
100
100
100
100
Total 5 100.00
Source: field survey, 2015

85
These sources of funds are well articulated in the literature review.
Table 4.11. Do you have strategic work plan and target revenue?
Do you have strategic work plan and target revenue?
Frequency Valid Percent
Yes 5 100
No 0 –
Total 5 100.00
Source: Field Survey Data, 2015
From the table above the respondents all indicated that there is a strategic work plan put in place by
the district to collect IGF. They all also responded that there is a target set annually. Usually, this
plan is prepared by the budget committee. This is done by reviewing the previous planned activities
in terms of revenue collection by taking into consideration seasonal conditions. The plan is then
monitored and evaluated at the end of the year. That becomes the input for the following year
taking into a ccount all variances.
Table 4.12. Do you set monthly revenue targets for your revenue collectors?
Do you set monthly revenue targets for your revenue collectors
Frequency Valid Percent
Yes 2 40
No 3 60
Total 5 100.00
Source: Field Survey Data, 2015

86
Responding to this question, 2 out of the 5 respondents say there is monthly targets representing
40%. However, 3 respondents indicated that monthly revenue targets are not given to revenue
collectors. The implication is that revenue collectors account f or revenue as and when they collect
revenue which could portray inefficiency in the system.

Table 4.13. Do you undertake regular monitoring and auditing?
Do you set monthly revenue targets for your revenue collectors
Frequency Valid Percent
Yes 5 100
No – nil
Total 5 100.00
Source: Field Survey Data, 2015
All the five respondents indicated that there is regular monitoring and auditing. This is usually
undertaken weekly by task force and on the spot checks during market days.
Table 4.14 Lambussie -Karni District IGF collections by components
LICENCE RATE FEES
& FINES RENT LAND INVESTMENT MISCELLANEOUS TOTAL
2008
8,122.30
527.56
10,189.09
69.80
1,141.00 – 2,028.90
22,078.65
2009
2,427.30
17,303.50
17,417.75
1,034.00
6,007.00 – 20.00
44,209.55
2010
5,082.65
43,128.70
24,727.52
263.40
3,632.00 18,733.00 60.00
95,627.27
2011
985.40
4,055.90
36,478.00
169.00
575.00 5,768.44 2,612.50
50,644.24
2012
1,889.20
14,997.20
32,096.90
415.00
647.20 15,859.02 9,568.50
75,473.02
2013
31,565.00
8,605.00
45,943.72
8,867.00
484.00 10,870.00 –
106,334.72
2014
7,702.34
7,994.00
62,421.39
405.54
7,400.00 32,660.00 1,829.59
120,412.86
TOTAL
57,774.19
96,611.86
229,274.37
11,223.74
19,886.20 83,890.46 16,119.49
514,780.31
RANKINGS 4TH 2ND 1ST 7TH 5TH 3RD 6TH

87
Figure 4.1 Revenue Performance of LKDA By Components

Source: LKDA annual accounts 2008 -2014
Table 4.15 Revenue components performance as a percentage of total revenue collected from
2008 – 2014
LICENCE RATES FEES & FINES RENT LAND INVESTMENT MISCELLANEOUS TOTAL
GH¢ 57,774.19 96,611.86 229,274.37 11,223.74 19,886.20 83,890.46 16,119.49 514,780.31
Percentage
of total
collection
(%) 11.22 18.77 44.54 2.18 3.86 16.30 3.13 100
source: LKDA annual accounts
From the table above, the district earns much of its revenue from the collection of fees and fines as
this constitute 44.54% of the average of the total col lections from 2008 -2014. This is followed by – 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsRevenue Performance of LDKA by components
LICENCE
RATE
FEES
& FINES
RENT
LAND
INVESTMENT
MISCELLANEOUS

88
rates 18.77%, investment constitute 16.3% whiles licence also constitute 11.22%. Rent, land and
miscellaneous constitute 2.18%, 3.86, and 31.3% respectively.
Performance of various rate components against total IGF
Contribution of Licences against IGF (2008 -2014)
Licences fees basically comes from rate payers who wish to operate businesses in the district. These
licences comes from beer bar operators, seamstresses, chemical sellers, provision shops. As seen in
table… below, in 2008 licence contributed 36.79 percent of the total IGF collected. However there
was a sharp decline to as low as 5.49 percent in 2009, 5.32% in 2010 and continue to 1.95% 2011.
The trend changed and increased sharply again to 29.68% in 2013 and dropped heavily in 2014 to
as low as 6.40%. This sharp rises and fall needs further examination as to whether businesses
continue to operate without licences the authorities just fail to collect the licences fees or have those
businesses collap se. On the average licence as a source of revenue is ranked 4th in the district and
that constitute an overall average of 11.22% of total average of revenue generated over the seven
year period of examination.

Table 4.16 Contribution of Licences against IGF (2008 -2014)
ANNUAL TOTAL
IGF (%) OF IGF
2008 8,122.30 22,078.65 36.79
2009 2,427.30 44,209.55 5.49
2010 5,082.65 95,627.27 5.32
2011 985.40 50,644.24 1.95
2012 1,889.20 75,473.02 2.50
2013 31,565.00 106,334.72 29.68
2014 7,702.34 120,412.86 6.40

89
Figure 4.2 Performance of Licence Revenue against Total IGF

source: LKDA annual accounts, 2008 -2014

Performance of rates against IGF (2008 -2014)
The performance of rates as source of revenue to the dis trict is displayed on table 4.15. Rates on the
average constitute 18.77% of the total average of total IGF and is ranked the 2nd best performing
source of revenue. Rates are such as bicycle rates, motorbike rates, cattle rate s, property rates
especially from the operations of the telecommunications mask by various telecommunications in
the district(which is hard to collect), etc are usually collected by the district annually. The table
below shows rates contributed 2.39% of to tal revenue. However, there was a sharp rise to 39.14%
in 2009 and continue to increase to its peak of 45.10% in 2010. In 2011 there was a decrease to
8.01% however it picked up to 19.87% in 2012. It contributed less than 9% in 2013 and 2014.

020000400006000080000100000120000140000160000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance of Licence revenue against Total IGF
TOTAL IGF
ANNUAL LICENCE

90
Table 4.17 Performance of rates against total IGF (2008 -2014)
YEAR ANNUAL TOTAL IGF (%) OF IGF
2008
527.56
22,078.65 2.39
2009
17,303.50
44,209.55 39.14
2010
43,128.70
95,627.27 45.10
2011
4,055.90
50,644.24 8.01
2012
14,997.20
75,473.02 19.87
2013
8,605.00
106,334.72 8.09
2014
7,994.00
120,412.86 6.64

Figure 4.3 Performance Of Rates Against Total IGF

source: LKDA annual accounts, 2008 -2014
020000400006000080000100000120000140000160000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerforamance of Rates against total IGF
TOTAL IGF
ANNUAL RATE

91
Contribution of Fees and Fines to Total IGF collection (2008 -2014)
The major source of revenue to the district is from fees and fines. This is ranked the number one
source of revenue. The fees usually from sale of market tickets, the use of mark et stalls/sheds,
slaughter fees etc and people who are usually charged for non payments of their obligations in good
time and have to pay penalties. From the table below in 2008 it was 46.15% of total revenue
collected. There was a decrease in 2009 and 201 0 of 39.4% and 25.86% respectively. This however
showed a sharp rise of 72.03% in 2011. This was not sustained as a sharp drop of 42.53% can be
observed in 2012. There was a slight increase of 43.21% in 2013 and 51.84% in 2014. Since the
district earns mos t of its revenue from fees and fines it will be more prudent to put in a lot of effort
the collection of this revenue by making sure that any trader who does business in the district
actually pays the right fees.
Table 4.18. Contribution of Fees and Fines to Total IGF collection (2008 -2014)
YEARS ANNUAL
FEES & FINES TOTAL IGF (% OF IGF)
2008
10,189.09
22,078.65 46.15
2009
17,417.75
44,209.55 39.40
2010
24,727.52
95,627.27 25.86
2011
36,478.00
50,644.24 72.03
2012
32,096.90
75,473.02 42.53
2013
45,943.72
106,334.72 43.21
2014
62,421.39
120,412.86 51.84

92
Figure 4.4 Performance of Licence Against Total IGF

source: LKDA annual accounts, 2008 -2014

Contribution of Rent Revenue against IGF (2008 -2014)
Rent revenue is the lease performing revenue component in the district as it is ranked 7th and
contributes on the average of 2.12% of the total revenue collected. Rent income are usually from
the market stores that the district has constructed for hire to traders in the district. From the table
below rent contributes less than 3% to total revenue in the district from 2008 -2012 but increased
significantly to 8.34% in 2013. It continued it low trend in 2014 as it fell to 0.34%. It is possible
that the sharp increase might have come as a recovery of non payments of rent of the previous
years.
020000400006000080000100000120000140000160000180000200000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance of Fees & Fines against Total IGF
TOTAL IGF
ANNUAL FEES & FINES

93
Table 4.19 PERFORMANCE OF RENT REVENUE (2008 – 2014)
YEARS ANNUAL (GH¢) TOTAL IGF (GH¢) (%) OF IGF
2008 69.80 22,078.65 0.32
2009
1,034.00 44,209.55 2.34
2010 263.40 95,627.27 0.28
2011 169.00 50,644.24 0.33
2012 415.00 75,473.02 0.55
2013 8,867.00 106,334.72 8.34
2014 405.50 120,412.86 0.34

Fig. 4.5 Performance Of Annual Rent Against Total IGF

Source: LKDA annual accounts 2008 -2014

020000400006000080000100000120000140000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance of Rent Against Total IGF
ANNUAL RENT
TOTAL IGF

94
Contribution of Land to Total IGF collection (2008 -2014)
The district does not earn much of its revenue from land. Land overall performance is 3.86% of
total average revenue collected which placed it as the 5th revenue collection component. The
district i s surrounded by vast land which is not demarcated and land lords have also not registered
with the district. This makes it difficult for the district to collect land fees. However the current
ways of collecting revenue from land is when building permits ar e being sought. This shows the
low performance of this revenue component. From the table below a record of 13.59% in 2009 was
recorded. Since then, the contribution of this component fell below 6.2%.

Table 4.20 PERFORMANCE OF LAND AGAINST TOTAL IGF
ANNU AL (GH¢) TOTAL IGF (GH¢) (%) OF IGF
2008 1,141.00 22,078.65 5.17
2009
6,007.00 44,209.55 13.59
2010 3,632.00 95,627.27 3.80
2011 575.00 50,644.24 1.14
2012 647.20 75,473.02 0.86
2013 484.00 106,334.72 0.46
2014 7,400.00 120,412.86 6.15

95

Source: annual accounts 2008 – 2014

Contribution of investment total IGF collection (2008 -2014)
The contribution of investment is significantly felt as this is the third contributor of IGF in the
district though seasonal. Its average percentage is 16.36% of the total IGF collected from 2008 –
2014. The investment income usually are from the operations of a tractor during the raining
seasons, the district also has a tipper truck which offer services to the district and a grader which
road contractors hire. Even though seasonal if properly managed could fetch more revenue to the
district. From the table b elow there is no sharp increases or decreases in the figures as observed in 0.0020000.0040000.0060000.0080000.00100000.00120000.00140000.00
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance of Land Against Total IGF
ANNUAL LAND
TOTAL IGF Figure 4.6 Performance of Land Against Total IGF

96
the other components. The first investment assets was acquired in 2009 that is why there is no
revenue recorded for 2008 and 2009. The table shows that the highest revenue collecte d was in
2014 as its contribution was 27.12% and the least in 2011 of 10.22% of total IGF collected.

Table 4.21 PERFORMANCE OF INVESTMENT REVENUE (2008 – 2014)
ANNUAL (GH¢) TOTAL IGF (GH¢) (%) OF IGF
2008 – 22,078.65 –
2009 – 44,209.55 –
2010 18,733.00 95,627.27 19.59
2011 5,768.44 50,644.24 11.39
2012 15,589.02 75,473.02 20.66
2013 10,870.00 106,334.72 10.22
2014 32,660.00 120,412.86 27.12

Figure 4.7 Performance Of Investment Against Total IGF

Source: LKDA annual accounts, 2008 -2014 0.0020000.0040000.0060000.0080000.00100000.00120000.00140000.00
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance Of Investment Against Total Igf
INVESTMENT
TOTAL IGF

97
Contribution of miscellaneous against total IGF collection (2008 -2014)
Miscellaneous collections are usually collections from unspecified receipts or refund of
overpayment. It constitutes 3.13% on the average of total IGF collected for the period under review
the table below shows the contribution of mi scellaneous receipts to IGF.
Table 4.22. PERFORMANCE OF MISCELLANEOUS AGAINST TOTAL IGF
ANNUAL (GH¢) TOTAL IGF (GH¢) (%) OF IGF
2008 2,028.90 22,078.65 9.19
2009 20.00 44,209.55 0.05
2010 60.00 95,627.27 0.06
2011 2,612.50 50,644.24 5.16
2012 9,568.50 75,473.02 12.85
2013 – 106,334.72 –
2014 1,829.59 120,412.86 1.52

Figure. 4.8 Performance Of Miscellaneous Against Total IGF

Source: LKDA annual accounts 2008 – 2014 020000400006000080000100000120000140000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YEARSPerformance Of Miscellaneous Against Total IGF
TOTAL IGF
REVENUE

98
Table 4.23. LAMBUSSIE -KARNI DISTRICT IGF EXPENDITURE (2008 -2014)
PERSONAL

EMOLUMENT TRAVEL AND

TRANSPORTATI
ON GENERAL

EXPENDITURE MATENANCE/
REPAI RS/
RENEWAL MISCELLANE
OUS TOTAL
GH¢ GH¢ GH¢ GH¢ GH¢ GH¢
2008
1,475.92 17,119.60
5,060.95 10,420.63
23,954.27
58,031.37
2009
3,570.00 25,242.70
10,101.82 2,939.28
24,269.62
66,123.42
2010
5,772.00 22,555.31
14,991.74 3,280.00
57,103.37
103,702.42
2011
6,865.00 12,052.09
11,034.73 2,267.00
23,548.53
55,767.35
2012
8,822.40 9,990.70
3,025.69 879.00
48,567.71
71,285.50
2013
10,130.00 15,983.20
17,098.17 4,496.00
49,583.79
97,291.16
2014
17,634.44 10,627.00
5,188.18 1,724.13
85,553.77
120,727.52
TOTAL
54,269.76 113,570.60
66,501.28 26,006.04
312,581.06
572,928.74

Source: LKDA annual accounts 2008 -2014
– 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 30,000.00
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YEARSLKDA IGF EXPENDITURE
PERSONAL EMULUMENTS
T & T
GENERAL EXPENDITURE
MAINTENANCE
MISCELLANEOUS Figure 4.9 LKDA IGF Expenditure

99
Table 4.24 LAMBUSSIE -KARNI DISTRICT INFLOWS OF EXTERNAL GRANTS

DACF DDF CBRDP/GSOP DWAP MP HIPC SWRSP TOTAL
GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢
2008
1,046,261.22 – –
– – –
1,046,261.22
2009
1,015,131.04
19,683.53 27,974.32
190,000.00 – –
1,252,788.89
2010
836,106.38
581,040.83 100,000.00
250,000.00
50,620.77 –
1,817,767.98
2011
816,910.43 – 63,693.40
273,618.81
25,000.00 –
1,179,222.64
2012
719,906.71
729,382.44 30,000.00
176,842.55
25,075.00 –
1,681,206.70
2013
1,006,844.20
346,215.00 253,467.35
–
1,250.00
265,923.82
1,873,700.37
2014
605,748.21
694,050.60 638,594.93
–
25,000.00
798,740.86
2,762,134.60
TOTAL
6,046,908.19
2,370,372.40 1,113,730.00
890,461.36
126,945.77
1,064,664.68
11,613,082.40
Source: LKDA annual accounts

100

Source: Annual Accounts 2008 – 2014

Table 4.25 PERFORMANCE OF IGF AGAINST TWO MAJOR EXTERNAL GRANTS WITH INCENTIVES
DACF DDF TOTAL IGF
GH¢ GH¢
2008 1,046,261.22 – 22,078.65
2009 1,015,131.04 19,683.53 44,209.55
2010 836,106.38 581,040.83 95,627.27
2011 816,910.43 – 50,644.24
2012 719,906.71 729,382.44 75,473.02
2013 1,006,844.20 346,215.00 106,334.72
2014 605,748.21 694,050.60 120,412.86
TOTAL 6,046,908.19 2,370,372.40 514,780.31

020000040000060000080000010000001200000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsDistrict Inflows Of External Grants
DACF
DDF
CBRDP/
GSOP
DWAP
MP
HIPCFigure 4.10 District Inflows Of External Grants
Gran Grants

101
Figure 4.11 Performance of IGF against Two major External grants with incentives

Source: LKDA Annual Accounts 2008 -2014

Performance of LKDA Area councils collection of IGF (2008 -2014)
The Lanbussie -Karni district assembly drives most of its revenue from the Hamile area council as this
contributes 51.03% of the average total revenue generated by the area councils as shown in Table 25
below. T his is due to the commercial activities being undertaken in that area. The area council is also a
border town sharing boundaries with Burkina Faso. Since this is a border town and serves as a gateway
into Ghana, it will be necessary for the district as par t of improving revenue collection to develop car
parks at the area for these travelers . The second revenue basket comes from the Lambussie area council
which contributes 21.86% of the total IGF generated by the area councils. There are a few economic
activ ities that go on in that area council. Since it is situated in the district capital it is important for the 020000040000060000080000010000001200000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsPerformance of IGF against two major External grants with
incentives
DACF
DDF
TOTAL IGF

102
district to undertake massive revenue generated activities like encouraging people to register their
business, obtain building permits when putting up new structures etc. The third and fourth revenue base
from the area councils comes from Samoa and Karni area councils where there are little commercial
activities there. They contribute 15.15% and 11.96% respectively of the total revenue generated by th e
area council.

Table 4.26 LAMBUSSIE -KARNI DISTRICT AREA COUNCILS REVENUE PERFORMANCE
LAMBUSSIE KARNI HAMILE SAMOA TOTAL
GH¢ GH¢ GH¢ GH¢ GH¢
2008 1,357.21 886.00 6,262.30 1,291.51
9,797.02
2009 2,160.60 1,552.60 10,895.05 1,726.90
16,335.15
2010 2,359.20 1,678.50 13,757.20 3,150.60
20,945.50
2011 8,282.00 3,194.90 16,233.01 3,880.70
31,590.61
2012 9,713.90 2,783.50 17,642.11 4,795.30
34,934.81
2013 10,934.50 6,711.90 21,897.50 6,114.00
45,657.90
2014 10,428.90 7,934.90 18,914.50 10,387.00
47,665.30
TOTAL 45,236.31 24,742.30 105,601.67 31,346.01
206,926.29
RANKING 2ND 4TH 1ST 3RD
% OF IGF 21.86 11.96 51.03 15.15 100

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Source: LKDA annual accounts 2008 -2009

0500010000150002000025000
2008 2009 2010 2011 2012 2013 2014Amount in GH¢
YearsLKDA Area Councils IGF Performance
LAMBUSSIE
KARNI
HAMILE
SAMOAFigure 4.12 LKDA Area Council IGF Performance

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How would you rate the following as part of the challenges
Table 4.27. Lack of current and reliable data
Lack of current and reliable data
Frequency Valid Percent
Strongly agree 4 80
Agree 1 20
Neutral – –
Disagree – –
Disagree Strongly – –
Total 5 100
Source: Field Survey Data, 2015
From the table above, 4 out of the 5 respondents representing 80% strongly agree that there is lack
of current and reliable database. 1 respondent representing 20% also agree to this assertion.
Relatively, 100% do agree that this data base problem is a challenge.
Table 4.28. Addressing the data base challenge will require skilled personnel and financial
resources
Addr essing the data base challenge will require skilled personnel and financial
resources
Frequency Valid Percent
Strongly agree 4 80
Agree 1 20
Neutral – nil
Disagree – –
Strongly Disagree – –
Total 5 100
Source: Field Survey Data, 2015

105
80% of the respondents strongly agree that in addressing the data base challenge will require skilled
personnel and financial resources. 20% also agree to this assertion. This means that all the
respondents agree that skilled personnel will be needed to address t his challenge and financial
commitment will be required.
Table 4.29. Cost including ( fuel and lubricants, wear and tear ) of generating revenue exceed
amounts of revenue collected
cost of collection exceed revenue collected
Frequency Valid Percent
Strongly agree 2 40
Agree 2 40
Neutral – –
Disagree – –
Strongly Disagree 1 20
Total 5 100
Source: Field Survey Data, 2015
The table above represent the cost of collecting revenue. 80% agree that the cost of generating
revenue exceed the amount of revenue collected. 20% however disagree to this.

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Table 4.30 Finance staff not well staffed to undertake revenue mobilization
Finance staff not well staffed to undertake revenue mobilization
Frequency Valid Percent
Strongly agree 1 20
Agree 2 40
Neutral 1 20
Disagree 1 20
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
The table above shows that 60% of the respondents agree that the finance unit is under staffed to go
round and monitor revenue collection. 20% of the respondents disagree to this whiles another 20%
remained neutral.
Table 4.31. Weak revenue task force
weak revenue task force
Frequency Valid Percent
Strongly agree 2 40
Agree 2 40
Neutral 0 –
Disagree 1 20
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
From the table above, 80% agree that the revenue task force is weak. Only 20% of the respondents
disagree to this assertion. The revenue task force thus needs to be strengthen.

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Table 4.32. Traditional rulers are not active t o influence tax payment
Traditional rulers are not active to influence tax payment
Frequency Valid Percent
Strongly agree 1 20
Agree 3 60
Neutral 1 20
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
From the table above, 80% of the respondents believe that traditional rulers are not active enough to
influence tax payments in their various areas of jurisdiction. 20% however disagree to this claim.
Meaning that traditional authorities themselves need to be put o n board to help mobilise revenue.
Table 4.33. Unrealistic tax rate are set because there is no clear cut guidelines from MLGRD
Unrealistic tax rate are set because there is no clear cut guidelines from MLGRD
Frequency Valid Percent
Strongly agree 2 40
Agree 2 40
Neutral 0 –
Disagree 1 20
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
From the table above, 80% of the respondents do agree that due to the absence of clear guidelines in
the setting of rates in the nation as a whole, unrealistic tax rates are agreed upon by the rating

108
authority and the tax payers. 20% however disagree to th is claim. This means that there should be
clear cut guidelines from MLGRD to direct rating authorities to set realistic targets.
Table 4.34. There is revenue leakages on the part of revenue collectors
There is revenue leakages on the part of revenue collec tors
Frequency Valid Percent
Strongly agree 3 60
Agree 2 40
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Filed Survey Data, 2015
The table above shows that all respondents representing 100% agree that there is some form of
revenue leakages on the part of some of revenue collectors. This is confirmed by the prolonged
accountability of revenue from the revenue collected as exhibited in table 49.

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Table 4.35. Cost of gazetting fee fixing resolution is high
Cost of gazetting fee fixing resolution is high
Frequency Valid Percent
Strongly agree 2 40
Agree 2 40
Neutral 1 20
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
The table above shows that the cost of gazetting fee fixing resolution to have the legal backing is so
high that the assembly cannot afford. This is evidenced by the 80% respondents who agree to this.
Only 20% of the respondents was neutral.
Table 4.36. M ajority of tax payers in your district do not understand the purpose of taxation,
their responsibilities as citizens and as a result they are not willing to pay their tax obligations
on time
Majority of tax payers in your district do not understand the pur pose of taxation, their
responsibilities as citizens and as a result they are not willing to pay their tax
obligations on time
Frequency Valid Percent
Strongly agree 4 80
Agree 0 –
Neutral 1 20
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015

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The table above shows that 80% of the respondents say majority of tax payers in the district do not
understand the purpose of taxation, their responsibilities as taxpaying citizens and as a result are not
willing to pay thei r tax obligations on time. The remaining 20% stayed neutral. This goes to affirm
the need for thorough revenue mobilization sensitization exercise.

As part of the way forward how will you rate the following
Table 4.37. Working with other institutions such as GRA to collect revenue from SME and
cede to the district
Working with other institutions such as GRA to collect revenue from SME and cede to
the district
Frequency Valid Percent
Strongly agree 3 60
Agree 1 20
Neutral 0 –
Disagree 1 20
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
From the table above 80% agree that to improve upon revenue generation the district needs to work
with other institutions such as Ghana Revenue Authority (GRA) to collect revenue from SMEs and
cede to the district assembly. Only 20% disagree with this institutional arrangement. As the district
is the gateway from Burkina Faso, it is important that the district should liaise with GRA to collect
some form of fees from traders who come to trade in Ghana through the boarder.

111
Table 4.38. Invest in money market to facilitate income growth without risk
Invest in money market to facilitate income growth without risk
Frequency Valid Percent
Strongly agree 1 20
Agree 2 40
Neutral 0 –
Disagree 2 40
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
Responding to this as part of the way forward, 60% of agree with the arrangement to put part of the
IGF into the risk free market such as government treasury bills whiles the remaining 40% disagree
with this arrangement. Where the district is able to collect enough revenue at a go, this could be
invested into the money market to earn interest which may go a long way to improve upon the
revenue performance of the district.
Table 4.39. To contact land valuation board to value land and properties.
To contact land valuation board to value land and properties.
Frequency Valid Percent
Strongly agree 1 20
Agree 3 60
Neutral 1 20
Disagree 2 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015

112
Responding to this as a way forward 80% of the respondents agree that there is the need to contact
land valuation board to provide the technical assistance to enable the district to properly value all
properties in the district for the purpose of assessing how much should be paid as taxes.

Table 4.40. To update mechanised payroll and request CAGD to cede basic rate to the district
To update mechanised payroll and request CAGD to cede basic rate to the district
Frequency Valid Percent
Strongly agree 2 40
Agree 3 60
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015

From the table all the respondents representing 100% agree that the mechanised payroll be updated
to collect basic rate from those in the formal sector by asking data CAGD to cede such basic rates
to the district. Though this may seem insignificant in terms of numbers this can go a long way to
help the district to improve upon their IGF collect ion since this will be done at no cost to the
assembly and also enhance their share of their Common Fund.

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Table 4.41. Tax education is important
Tax education is important
Frequency Valid Percent
Strongly agree 5 100
Agree 0 –
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
From the table above all respondents representing 100% do agree strongly that tax education is
important to sensitize the numerous citizens on the need to pay their taxes.

Table 4.42. To create tax payers register of all components and to update it regularly
To create tax payers register of all components and to update it regularly
Frequency Valid Percent
Strongly agree 5 100
Agree 0 –
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
The table above indicate that all the respondents representing 100% see the need to create a tax
payers register of all components and to update it regularly. This will enhance easy way of revenue

114
collection in the district and revenue could be estimated r eliably. This however cannot be done with
ease if tax payers are not sensitized to understand the purpose of the taxation.

Table 4.43. The current street naming and property addressing system will improve upon the
IGF collection
To create tax payers regis ter of all components and to update it regularly
Frequency Valid Percent
Strongly agree 1 20
Agree 3 60
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015
80% of the respondents agree that the current street naming and property addressing systems will
improve upon the IGF collection. Only 20% disagree to this assertion. The district has successfully
met the deadline for the street naming and property addressing system directive given by the
President of Ghana. Hence future researchers in this research area could find out how that has
improved upon the revenue collection.

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Table 4.44. Increase tax rates
Increase tax rates
Frequency Valid Percent
Strongly agree 0 –
Agree 3 60
Neutral 0 –
Disagree 1 20
Strongly Disagree 1 20
Total 5 100
Source: Field Survey Data, 2015

When asked of the view of respondents on increasing tax rates to improve upon IGF mobilization,
60% agree that this is a way of improving upon IGF mobilization whiles the remaining 40%
disagree. The question therefore is, are the current rates of tax being honoured by the rate payers? If
yes then it could be the basis for the increment in the rates. However if the answer is no, then this
those not form the basis for inc rement in the tax rates but think of widening it.

116
Table 4.45. Widen the tax net
Widen the tax net
Frequency Valid Percent
Strongly agree 4 80
Agree 1 20
Neutral 0 –
Disagree 0 –
Strongly Disagree 0 –
Total 5 100
Source: Field Survey Data, 2015

100% of the respondents agree that the tax net should be widen to robe in a lot of the tax payers as a
means of improving upon the revenue mobilization in the district.

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The second type of respondents were the tax collector. The main aim was to confirm out the efforts
put place by the LKDA to motivate them to collect more revenue. Also the challenges they face and
ways of improving the system. There are fifteen (15) revenue collectors both paid and commission
base. Only 13 were able to pa rticipate in the survey. The remaining two could not be contacted.
Table 4.46. what is your terms of employment?
Terms of employment
Frequency Valid Percent
Permanent 4 31
Temporary 9 69
Total 13 100
Source: Field Survey Data, 2015
From the table above, out of the 13, 4 are on central government payroll representing 31% whiles
the remaining 9 representing 69% are on commission basis. The four permanent collectors represent
the four area councils and they oversee the revenue operations.
Table 4.47. which type of revenue items are you collecting?
Which type of revenue items are you collecting
Revenue item Frequency Valid Percent
Rates
Licences
Fees & fines
Land
Other 13
13
13
0
0 100
100
100
Nil
nil
Source: Field Survey Data, 2015
The table above represents the revenue items being collected by the revenue collectors. All the
revenue collectors collect rates, licences, fees & fines, representing 100% each of the revenue

118
items. They were not able to collect revenue from land owners. T his is perhaps the difficulty in
valuing land and making landlords to pay their appropriate fees.

Table 4.48. how many tax payers are there in your area in each of the IGF components?
how many tax payers in each IGF components
Revenue item Frequency Valid Percent
Rates
Licences
Fees & fines
Land
Do not know

13 Nil
Nil
Nil
Nil
100
Source: Field Survey Data, 2015
When asked about the number of people paying the various IGF components, all respondents did
not know the number of people. This implies that there is no register of revenue payers in the
various area councils.
Table 4.49. how do you collect revenue in your area?
how do you collect revenue in your area?
Frequency Valid Percent
Individual comes to pay voluntary
I go round to collect myself
Total 0
13
13 nil
100
100
Source: Field Survey Data, 2015
From the table above, majority of the tax payers honour their tax obligations only when the revenue
collectors comes their way. This is evidenced by the percentage of the tax payers going round the to

119
collect the tax themselves. The implication is that maj ority of revenue collectors will be left out in
the tax net due to the absence of the tax register. It also implies that a lot of sensitization will have
to be carried out.
Table 4.50. how long does it take to account for the revenue collected to the reven ue office?
how long does it take to account?
Frequency Valid Percent
Same day
A day after
Two days after
Three days after
Four or more days
Total 2
1
–
1
9
13 15
8
Nil
8
69
100
Source: Field Survey Data, 2015
The table above shows the number of days the revenue stays with the revenue collectors before they
account to the district revenue office. 15% of the revenue is accounted for on the same day, 8% is
accounted for a day after and 8% three days after. Majority of the revenue representing 69% is
accounted for after four or more days. This means that revenue collectors hold significant amount
of the revenue in cash at their disposal. They could be trading with the revenue and account for it
any time. This could also be motivated by the lack of sup ervision on the part of the district
assembly staff. This could also lead to revenue leakage.

120
Table 4.51 Do you have stakeholders who work with you on IGF mobilization in your area?
do you have stakeholders who work with you on IGF mobilization in your area
Frequency Valid Percent
Yes 9 69
No 4 31
Total 13 100
Source: Field Survey Data, 2015
From the table above, 69% have stakeholders who help them in the revenue mobilisation. They are
mostly the assembly members of the various electoral areas and chiefs. They help by gathering the
people for the revenue collectors to go and collect some of the rates. These rates are mostly cattle
rate and basic rate. The remaining 31% do not h ave stakeholders who assist them. This means that
the various assembly members and the chiefs should be encouraged to assist those revenue
collectors to collect revenue.
Table 4.52. Have you had training on revenue mobilisation?
Have you had training on re venue mobilisation
Frequency Valid Percent
Yes 2 15
No 11 85
Total 13 100
Source: Field Survey Data, 2015
From the table above, only 2 respondents out of the 13 have been trained on how to collect revenue
representing 15% whiles the remaining 85% have not been given any formal training on revenue
mobilisation. This implies that majority of the rate payers who refuse to pay rates could be

121
attributed to the approach of some of the revenue collectors. It could also mean that majority of the
revenue collectors are not known formally by the district assembly.

Table 4.53. What is the motivation put in place by the d istrict assembly to encourage you to
perform well?
Motivation to improve upon revenue collection
Frequency Valid Percent
(a) Prompt payment of commission 7 78
(b) value books are readily available 10 77
(c) availability of mean of transfer
(d) there is training programs available
(e) support from revenue team to collect revenue 3
2
8 23
15
62
Source: field survey, 2015
From the table above, 78% of the commission collectors indicate that there is prompt payment of
their commission and that serve as a motivation for them. The remaining 22% think otherwise. In
terms of availability of value books, 77% indicated that value books are readily available. The
remaining 23% think otherwise. In terms of availability of transport only 23% indicated that there is
availability of transport any time they want to undertake revenue mobilization. The remaining 77%
do not have access to means of transport from the assembly. In terms of availability of training
programs 15% indicated that there are training programs avai lable the remaining 85% do not think
there is training programs available. Finally, 8 respondents representing 62% say they get support
from the assembly's revenue team to assist them to collect revenue. This support comes from an
interim revenue task forc e formed by the assembly.

122
Table 4.54 . Are you satisfied with your job? Explain
Are you satisfied with your job
Frequency Valid Percent
Yes 2 15
No 11 85
Total 13 100
Source: field survey, 2015

From the table above, 5 revenue collectors representing 38% say they are satisfied with their work.
The main reason they assigned was that the commission they collect serves as additional source of
income to them. The other 8 representing 62% say they are not satisfied with their job and the main
reason they assigned was that the commissioned based collectors want to be made permanent and
placed on the DA payroll or the central government.

Table 4.5 5 What additional incentives or motivation do you need to improve upon your work?
What additional inc entives do you need
Frequency Valid Percent
Means of transport 8 62
Tax education
Prompt payment of commission 3
2 23
15
Total 13 100
Source: Field Survey Data, 2015
Responding to the above question, 62% of tax collectors say they want mean of transport to be
provided by the district assembly. 23% indicated that they want the district assembly to undertake

123
tax education to help the people appreciate the use of the reve nue collected by the revenue
collectors. 15% indicated that they want prompt payment of their commission.

Table 4.56 . Do you have a work plan and target revenue for the year?
Do you have a work plan and target revenue for the year
Frequency Valid Percent
Yes 4 31
No 9 69
Total 13 100
Source: Field Survey Data, 2015
From the table above, 69% of the respondents do not have a work plan and target revenue for the
year. What this means is that any revenue they collect is enough for them. This also implies that
there could be apathy on the part of the revenue collectors to collect more revenue. The remaining
31% say they have work plan and target revenue for the year. The plan is based upon the previous
year's collection and they only try to improve upon that.

124
Table 4.56. Does the payment that you receive as a tax collector of the district sufficient
enough as compared to your duties and responsibilities?
Payment received compared with duties and responsibilities
Frequency Valid Percent
Strongly agree 1 8
Agree – Nil
Strongly disagree 9 69
Neutral 1 8
Disagree 2 15
Total 13 100
Source: Field Survey Data, 2015

From the table above, 69% strongly disagree that the payment that they receive is sufficient enough
as compared to their duties and responsibilities. 15% disagree, 8% strongly agree whiles another
15% was also neutral. In terms of agreement and disagreement, only 8% agree whiles 84%
disagree. As tax collectors are mainly paid on commission basis, it is obvious that many tax payers
do not honour their tax obligations resulting in the low remuneration that the tax collectors receive.
Hence that might account for the high number of respondents disagreeing to the question. To
supplement their income they do undertake farming and rearing of animals.

125
Table 4.57. How do you describe tax payers in your area? Tax payers in my area understand
the purpose of taxation, their responsibilities as tax payers and as a result they pay their tax
obligations fully and regularly.
Table : general description of tax payers
Frequency Valid Percent
Strongly agree 1 8
Agree 4 31
Neutral 0 –
Disagree 3 23
Strongly Disagree 5 38
Total 13 100
Source: field survey, 2015

From the table above, only 1 respondent representing 8% strongly agree that tax payers understand
the purpose of taxation. 4 respondents representing 31% also agree to that making a total of 39%
agreement to the scenario. That goes to confirm that there need to be tax education in the district as
23% and 38% d isagree and strongly disagree respectively. This means that 61% of the respondents
say that tax payers do not understand the purpose of taxation, their responsibilities as tax payers and
as a result they do not honour their tax obligations fully and regula rly. Some of the reasons tax
payers assign for not honouring their tax obligation is that they think the money paid end up in the
individual pockets of the tax collectors.

126
Table 4.58. As a tax collector what general problems do you observe on IGF mobili zation?
As a tax collector what general problems do you observe on revenue mobilization
Frequency Valid Percent
Lack of education 8 61
Lack of training of revenue collectors 2 15
Lack of markets 1 8
Delay in payment of commission 1 8
Difficulty to locate tax payers 1 8
Total 13 100
Source: Field Survey Data, 2015
When asked about the general problems on IGF mobilisation, 8 respondents representing 61%
indicate that there is lack of education on the need to pay tax. 15% think that revenue collectors
need training to be able to approach tax payers in proper manner. 8% each think that the problem
has to do with lack of vibrant markets, delay in payment of commission and difficulty in locating
tax payers.
Table 4.59. What do you recommend to i mprove IGF mobilization system in the district?
Recommendations to improve IGF mobilization
Frequency Valid Percent
Provision of mean of transport 4 31
training of revenue collectors 2 15
Education of tax payers 5 38
Establishment of revenue task force 1 8
The need to have tax register 1 8
Total 13 100
Source: Field Survey Data, 2015

127
As part of recommendations provided by the revenue collectors to improve upon the IGF
mobilization, 4 respondents representing 31% indicated that to improve upon revenue mobilization
means of transport should be provided to them to enable them to make them more mobile. 2
respondents representing 15% say to improve upon IGF mobilization, revenue collectors should be
given refresher training. 38% of the respondents t hink that there should be tax education. The
remaining 2 say that there is the need to establish a revenue task force and have a tax payers
register.

128
The third type of respondents were the tax payers. The main aim was to gather information from
them whether they know the objectives of taxation, their rights and obligations as tax payers, and to
find out what should be done to encourage them to honour their tax obligations. There was
information as the number of rate payers in the district. A samp le of 10 rate payers was randomly
selected from the 4 area councils given a total sample size of 40. All the 40 were contacted for the
survey. Only those that were interested in participation in the survey were the only people that was
contacted.
Table 4.60. Shows the rate payers interviewed and the type of business
Shows the rate payers and the type of business
Type of business operated Frequency
Motor and bicycle spare parts dealers 2
Provisions shop owners 11
Seamstresses/tailors 4
Hair dresses 4
Beer bar operators
Over the counter drug stores
Food vendors
Petrol sellers
Cereals dealers
Grinding mill operator 7
2
2
5
2
1
Total 40
Source: Field Survey Data, 2015

The table above shows randomly selected rate payers who were interested to be part of the survey.

129
Table 4.61. Do you know the objectives of taxation?
Do you know the objectives of taxation
Frequency Valid Percent
Yes 18 45
No 22 55
Total 40 100
Source: Field Survey Data, 2015

Responding to this question, 18 respondents representing 45% know the objectives of taxation. The
remaining 22 representing 55% do not know the objectives of taxation. This then calls for
sensitization of rate payers.
Table 4.62. What is it used for?
What is it used for
Frequency Valid Percent
Undertake development projects in the district 18 100
It is not used for developmental projects
I don't know 0
0 Nil
Nil
Total 18 100
Source: Field Survey Data, 2015

Following from table 4.62 above, all the 18 respondents representing 100% indicated that the
revenue from taxation is used to undertake development projects in the district.

130
Table 4.63. Do you know that as a tax payer you have rights?
Do you know that as a tax payer you have rights
Frequency Valid Percent
Yes 21 53
No 19 47
Total 40 100
Source: Field Survey Data, 2015
As per the table above, 21 out of the 40 respondents representing 53% know that they have rights as
tax payers. The remaining 19 respondents representing 47% do not know that they have rights as
tax payers.
Table 4.64. Do you know your obligations as a tax paying citizen?
Do you know your obligations as a tax paying citizen
Frequency Valid Percent
Yes 17 43
No 23 57
Total 40 100
Source: Field Survey Data, 2015
As per the table above, 17 out of the 40 respondents representing 43% know their obligations as a
tax paying citizen. 23 respondents representing 57% do not know their obligations as taxpaying
citizen. Following from table 62 and 63 suggests that there should be tax education.

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Table 4.65. Have you been informed about the purpose of taxation, your rights and obligation
as a tax payer?
Have you been informed about the purpose of taxation, your rights and obligation as a
tax payer
Frequency Valid Percent
Yes 16 40
No 24 60
Total 40 100
Source: Field Survey Data, 2015
From table 4.65, 16 respondents representing 40% say they have been informed about the purpose
of taxation, their rights and obligations whiles the remaining 24 respondents representing 60% have
not been informed about the purpose of taxation their rights and obligations as tax payer.
Table 4.66. If yes how did you find the programme?
Recommendations to improve IGF mobilization
Frequency Valid Percent
Poor

Fair

Good
Excellent 2
4
10
– 13
25
62
–
Total 16 100
Source: Field Survey Data, 2015
From the table above 2 respondents indicated that the program was poor representing 13%. 4
respondents representing 25% think that the program was fairly presented whiles 10 respondents
representing 62% think that the program was good.

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Table 4.67 If No how do you see the relevance of such awareness creation programmes on
IGF?
No how do you see the relevance of such awareness creation programmes on IGF
Frequency Valid Percent
Very relevant

Relevant

Neutral
Irrelevant
Very irrelevant 21
–
3
–
– 88
–
12
–
–
Total 24 100
Source: field survey data, 2015
From the above table 21 out of the 24 respondents representing 88% see such awareness creation
programmes on IGF mobilization as very relevant. Only 3 representing 12% stayed neutral. This
goes to confirm that a lot of tax education need to be done in the district.

Table 4.68. What is the current mode of honouring your tax obligation?
What is the c urrent mode of honouring your tax obligation
Frequency Valid Percent
I go to pay myself 9 22
I pay any time the revenue collector prompts me to pay 31 78
Total 40 100
Source: Field Survey Data, 2015
From the table above only 9 respondents out of the 40 representing 22% pay their tax voluntarily
whiles 31 out of the 40 representing 78% pay only when the tax collectors come to prompt them.

133
This means a lot of revenue could be left uncollected if revenu e collectors are not proactive.
Majority of the tax payers will evade tax since there is no tax register to know those who have paid
up their tax obligation .
Table 4.69. Do you believe your tax payment is used to run various government development
progr ams.
Do you believe your tax payment is used to run various government development
programs.

Frequency Valid Percent
Yes 31 43
No 9 57
Total 40 100
Source: Field Survey Data, 2015

Table 4.69 shows the perception of tax payer on the use of the IGF. 31 out of the 40 respondents
representing 78% believe that the IGF is used run various government development programs
whiles 9 out of the 40 representing 22% do not believe that tax revenue is used to run various
government development programmes.

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Table 4.70. IGF mobilization system is exposed to corruption and misuse. How for day agree
or disagree with this view?
General description of tax payers
Frequency Valid Percent
Strongly agree 8 20
Agree 10 25
Neutral 7 12
Disagree 10 25
Strongly Disagree 5 18
Total 40 100
Source: field survey data, 2015
In terms of exposure to corruption and misuse on IGF mobilization system, 8 out of the 40
respondents representing 20% strongly agree that the system is exposed to corruption and misuse,
10 respondent representing 25% also agree to this assertion . However 5 out of the 40 representing
12% strongly disagree whiles another 10 representing 25% also disagree to this assertion. 7 out of
the 40 stayed neutral. Consolidating these fig ures in terms of agreement and disagreement, 45%
agree that the system is exposed to corruption and misuse whiles 37% disagree and the remaining
18% stayed neutral. This results may account for the reasons why tax payers are not interested in
honourin g their tax obligation.

135
Table 4.71. How far do you agree or disagree with the view that corrupted officials, tax
collectors and tax payers usually are not charged and punished for their conduct. ?
How far do you agree or disagree with the view that corrupted officials, tax collectors
and tax payers usually are not charged and punished for their conduct
Frequency Valid Percent
Strongly agree 7 17.5
Agree 10 25
Neutral 8 20
Disagree 8 20
Strongly Disagree 7 17.5
Total 40 100
Source: field survey data, 2015
Form the table above, 7 out of the 40 respondents representing 17.5% strongly agree that usually
corrupted officials, tax collectors and tax payers usually are not charged and punished for their
conduct, 10 respondents represent ing 25% also agree to their assertion. 7 out of the 40 representing
17.5% also strongly disagree whiles 8 respondents representing 20% also disagree. In terms of
agreement and disagreement, 42.5% agree to this assertion whiles 37.5% disagree. The remaini ng
20% stayed neutral.

136
CHAPTER 5
SUMMARY, RECOMMENDATION AND CONCLUSION
5.1 Introduction
This research work sets out to find out the effects of intergovernmental transfers and the incentives
for revenue m obilization in the Lambussie -Karni district. The study was to find ways of improving
upon the revenue mobilization system in the district. This chapter seeks to review the summary of
findings of the research and to recommend the way forward on revenue mobilization in the district
for local developmen t.

5.2 Key findings
1. Incentives in external grants are set to motivate IGF collection: the study found out that
among the external grants such as DACF, DDF, HIPC,CBRDP/GSOP, SRWSP into the
district only two (DACF & DDF) have the incentives to encourage the district to mobilize
IGF to increase their share of these two major development grant s. The rest of these inflows
are policy intervention grants support by donor countries and does not matter if the district
improves upon revenue collection or not. These incentives are set with the view of
encouraging the district to improve upon their sha re of the grants sharing formula –
"incentive factor" as to the DACF and "fiscal capacity" for DDF.
2. Intergovernmental transfer discourage the district to collect revenue: the study also
revealed that the overall effects of these transfers despite the incent ives attached to improve
on revenue generation discourage the district to collect more revenue rather than encourage.

137
The reason been that revenue mobilization is not the only factor that influence the flow of
these funds. Hence where they fail to meet the se incentive factors the funds will still come
to the district anyway
3. Autonomy to fix rates: the study also revealed that the district has the autonomy in fixing
rates as this is done by the budget committee in consultation with stakeholders such as rate
payers association. The deficiency found here is that the district does not have a tax register
to actually know the number of rate payers to ensure that these rate payers fair represent the
interest of their members. This means that there is inadequate rev enue data base in the
district. Realistic rates are therefore not charged.
4. Weak stakeholder participation: the study found out that there are stakeholders who help
in the revenue generation. These are normally the chiefs, herdsmen and assembly members
of the various electoral areas who represent their people. Recently the involvement of such
major stakeholders is weak and needs to be whipped to get involved. Traditional leaders are
becoming inactive, in sharp contrast to what used to be in the past as being active and
influential and serve as a rallying point for community driven initiatives and compliance
with local government rules, regulations and norms, especially regarding fulfilment of tax
obligations.
5. Revenue performance: the 7 years IGF performance o f the district shows a gradual
improvement in their collection. In 2008, the collection was GH¢ 22,078.65 to
GH¢120,412.86 in 2014. The significant increase in the performance was due to the
effective operations of the assembly's grader services in 2013 an d 2014.
6. Possible source of revenue: the study found out that the revenue basket comes from
Hamile area council which contributes about 51.02% of the total revenue generated from the

138
4 area councils. Check reveals that the revenue generated comes from the n ormal traditional
sources. However, as the area is sharing boundaries with Burkina Faso and serves as a
gateway to Ghana, it is prudent for the district to acquire and develop it into car parks for a
fee. This is because most of these truck drivers travel in tired and hence park any how along
the major road for free due to lack of parking space.
7. Citizen and tax payers' rights and responsibilities: most of the tax payers interviewed do
not know the objectives of taxation, their rights and obligations as tax payers, hence
resulting in apathy on their part which has the tendency of affecting the level of citizen's
compliance with their tax obligations.
8. Initial cost of investment: Related to the above means that there will be high initial cost to
educate the pu blic geared towards eliciting their responsibility in fulfilling their tax
obligations in this era that the assembly is cash trapped and this will pose a great challenge
to the district.
9. Mobility: it was observed that the district has no revenue mobilizati on vehicle to monitor
revenue collection. The revenue collectors as well do not also have any means of
transportation provided to them for their job. This poses a great challenge due to the spatial
settlement of the population in the district. This means t hat the revenue collectors can only
collect revenue from those who are closer to them leaving most of the taxes uncollected.
10. Revenue leakages: the study also revealed that there is possible revenue leakages on the
part of revenue collectors as this is evid enced by the fact that there is no prompt payment of
revenue collected in spite of the existence of a banking facility. This was also confirmed by
the implementers of the decentralisation process using the interview guide.

139
11. Update of mechanised payroll. As a way of boosting revenue collection in the area of
basic rate from the formal sector, the study revealed that one way the district can collect
basic rate from those in the formal sector was to updated the mechanised payroll and ask
controller and accoun tant general department to cede such revenue to the district. The basic
rate which currently is 10Gp a year needs national policy to be review upwards or it should
be a progressive tax or scraped entirely. If this can b e a progressive tax it can go a long way
to help districts to improve upon their IGF collection.

5.3 Recommendations
These recommendations put forward aim at helping the Lambussie -Karni District to improve upon
its revenue mobilization system:
1. Monitoring and supervision. As a measure to ch eck leakages and embezzlement in the
system, it is prudent for the district to undertake regular monitoring and supervistion of
these revenue collectors.
2. Tax education: there is the need for the district to undertake tax education to educate the tax
paying citizens on their obligations to pay their taxes. The initial cost will be high but that
will go a long way to help the citizens appreciate what these revenue are being used for.
3. Establishment of a tax register: the district does not have any data base re garding the rate
payers in the district. There is the need for the district to register all persons undertaking
economic activities in the district.
4. Strengthening of the revenue unit of the district: from the study it was found out that the
revenue unit of the assembly was weak. This is because the assembly does not have a local

140
revenue inspector who should superintend over the revenue collection. Hence the finance
office have to double up on office duties and also go round to monitor revenue collections.
As stated earlier in the key findings, mobility of these revenue collectors is key to raising
more IGF, it is therefore important for the district to provide means of transport such as
motor bikes to the four area councils and perhaps bicycles to the other commission
collectors to facilitate their work in the remote areas.
5. Active participation of stakeholders: stakeholders in the district should be encouraged to
actively participate in revenue generation in their respective areas. They should help educate
the citizenry on the need to honour their tax obligation.
5.4 Conclusion
Since MMDAs have the power and mandate to mobilise and manage their IGF it is important for
the Lambussie -Karni District Assembly to initiate innovative approaches to identify and dive rsify
their sources of revenue and also to embark upon a vigorous tax education to deal with the human
attitude c hallenges facing the assembly.

141

142
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