General Guide to the Local

Government Budget Process for

District & LLG Councillors,
NGOs, CBOs & Civil Society

Prepared by
Local Government Budget Committee

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 General Guide to the Local Government Budget Process

CONTENTS
Section 1: Introduction 6

Section 2: Key elements of the Budget Process 6-7

Section 3 Budgeting
3.1 Tools in Budgeting 7-8
3.2 Increased Decision Making Powers
under the Fiscal Decentralisation Strategy 8-9
3.3 Flexibility Requires Prioritisation 9-10
3.4 No Budget, No Central Government Grants 10
3.5 More Autonomy means a greater focus on results 12
3.6 Implementing the Budget –Better performance
will mean more central allocations 12
3.7 What is needed for a successful budgeting process? 12-13

Section 4: The budget process – 3 stages

4.1 Stage 1 – Preparing for the budget process 13-16
4.2 Stage 2 – Preparing the BFP 16-20
4.3 Stage 3 – Finalisation and Approval of the
Annual Workplans and Budget. 20-22
 General Guide to the Local Government Budget Process

LOCAL GOVERNMENT BUDGET CALENDAR

Timing Activity/event Responsibility Output
Centre
September 1. Local Governments LGBC Agreement about the
Budget Committee overall planning &
agrees the rules, budgetary framework
conditions & flexibility of before start of budget
the coming planning & process
budgetary process
October 2. Holding of National Ministry of Finance, National priorities,
Budget Conference Planning & Economic resources & inter sector
Development allocations communicated
to local governments
October 3. Holding of Regional Ministry of Finance, Recurrent and development
Local Government Planning, & Economic grants ceilings
Framework Paper Development, sector communicated to local
Workshops ministries governments, alongside
changes to sector policies
and guidelines.
Early 4. Executive Committee Executive Committee Intersectoral priorities
November meets to determine identified for potential
intersectoral priorities as budget reallocations & &
identified in previous flexibility
DDP and to fix
intersectoral allocation %
Early 5. Budget Desk prepares Local Government Draft activity & time
November Local Government Budget Desk, schedule for the entire
Budget Call and Executive Committee budget process, and
circulates it to Heads of indicative budget
Department and Lower allocations for LLGs &
Local Governments. HoDs, etc.
November 6. Sectors start preparing Heads of departments Draft inputs to budget
input to budget & lower local framework paper to be
framework paper, governments presented to sector
reviewing performance committees and
and prioritising planning development plans to be
& budgeting for future considered by LLG councils.
programmes.

November 7. a: LLGs identify Planner Draft District/Municipality

investments and prepare District Technical Development Plan &
draft development Planning Committee detailed workplans and
budgets and plans. budgets for each an every
b: Planning Unit compiles activity LG intends to
LLG development undertake, no matter how
activities into DDP, and funded.
presents them to HODs
who propose district level
Sector investments which
are compiled in sector
BFPs. These include full
and complete workplans

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 General Guide to the Local Government Budget Process

and budgets for all district

level activity linked
directly to DDP
December 8. Draft Sector BFPs and Sector committees Sector priorities and draft
development plans workplans & budget
complete. Sector estimates ready for
committees examine compilation by the Budget
sector inputs to the Desk
budget framework paper
December 9. Budget desk Budget Desk Draft budget framework
compiles/prepare draft paper and development
budget framework paper, plan ready to be presented
and the planning unit the to Executive Committee
development plan. The
District Technical
Planning Committee
reviews them.
December 10. A meeting of the Executive Committee, Draft budget framework
Executive Committee, Chairpersons of paper and development
Chairpersons of Sector Sector Committees, plan ready for Budget
Committees, HoDs is HoDs Conference
held to examine draft
budget framework paper,
and prioritise sector
expenditures and
programmes,
December 11. Holding of Budget Full council, NGOs, Budget input (i.e. priorities,
Conference Civil Society. re-allocations & preliminary
budget estimates) ready for
incorporation in draft budget
by the Budget Desk
December 12. Budget Desk Budget Desk Final budget framework
incorporates input from Executive Committee paper and draft budget
budget conference in ready to be presented to
budget framework paper Finance- or Executive
and draft budget. Committee
Executive Committee Draft budget ready for sub-
approves budget mission to MoFPED
framework paper & draft
budget
January to 13. MoFPED & line ministries Central Government Revised grant ceilings &
May examine local comments ready to be
government budget communicated to LGs
framework paper & draft
budgets
May 14. Budget Desk incorporates Budget Desk Final draft budget and
grant ceilings & workplan ready to be
comments received from presented to sector
MoFPED in annual committees
workplan & draft budget
Beginning of 15. Sector committees review Sector Committees Final input from sector
June final annual workplan & committees to annual
budget workplan & budget
Beginning of 16. Finance- or Executive Finance- or Executive Final draft budget (including

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 General Guide to the Local Government Budget Process

June Committee examines final Committee annual work plan) ready to

draft budget be read by council
Before the 17. Reading and approval of Full council Approved budget to be
th
15 of June budget signed by chairperson and
submitted to
MoFPED/MoLG/LGFC &
Auditor General

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 General Guide to the Local Government Budget Process

1. Introduction

This guide provides political decision makers (local government councillors and
members of civil society) with practical tools to guide them through the steps of the
local government planning and budgeting cycle.

This guide brings together the entire local government planning and budgeting
process and integrates district development planning and the Local Government
Budget Framework Paper into the overall local government budget cycle. The new
elements of the Fiscal Decentralisation Strategy are also included.

2. Key Elements of the Budget Process

A local government budget is the detailed plan of how a local government plans to
spend funds in line with its objectives, needs and priorities. Local governments
have discretionary planning and budgeting powers, but their plans and budgets
need to reflect priorities and objectives set out in national policies, plans and
budgets. Consequently, the local government planning and budget cycle has to fit
into the national planning and budgeting cycle. This starts in October and ends in
June.

The overall Planning Framework for Uganda is the Poverty Eradication Action Plan
(PEAP), which sets out government’s national objectives and strategies for
reducing poverty.

The Medium-Term Expenditure Framework, and the supporting National Budget

Framework Paper process, is a three-year rolling budget system that constitutes
the link between PEAP and the budget allocations for the implementation of the
various programmes under the plan. Government ensures that these national
priorities are reflected in Local Government budgets through the allocation and
transfer of conditional grants to Local Governments. The highest priority
programmes within the PEAP, and the national budget fall under the PAF.

The two main principles behind the local government planning and budgeting
system are:
1. Realistic Budgeting through an Integrated 3-Year Budgeting &
Planning Framework:
?? A three-year rolling (medium term) framework for planning and
budgeting is used so that services and investments can be planned for and
communicated well in advance.
?? The preparation of 3-year district/urban authority development plans,
which is fully integrated with the budgeting process, identifies the specific
programmes and projects that are to be carried out to address specific
communities’ local priorities and needs.

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 General Guide to the Local Government Budget Process

?? Planning and budgeting must be carried out within expected

revenues over the medium term, as this helps Local Government prioritise
programmes and ensure that what is actually planned and budgeted for can
be realistically achieved and afforded. This is done through the preparation
of the LGBFP.

2. Focusing on the Intended Results of Expenditures – Setting

objectives and targets and measuring performance.
?? Local Governments spend money in order to achieve objectives. By
clearly stating the objectives of expenditure, and setting measurable targets,
this enables local governments to deliver services and choose programmes
and investments, which are better targeted towards local needs and
priorities.
?? By linking the achievement of service delivery and investment
performance targets to specific expenditures in the budget, Local
Governments can assess the efficiency of their expenditure choices, identify
problems and establish how funds can be better spent.

3.0 Budgeting

3.1 Tools in Budgeting

The three main tools that enable integrated planning and budgeting are the:
1. The District/Urban Local Government Deve lopment Plan (DDP),
which constitutes the overall, integrated, district/urban authority planning
tool. It incorporates the plans of lower level local governments, and of sector
departments. All activities to be undertaken by Local Government, whether
funded by the centre, local revenue, unconditional grants or donors are
included in the DDP. An activity that is not contained and identified in the
DDP is not an authorised expenditure.

2. The Local Government Budget Framework Paper (BFP), which

articulates a Local Government’s 3-year budget strategy, and through
integrating planning & budgeting helps ensure that budget decisions reflect
a Local Governments longer term objectives. The BFP does so by setting
out:
??Previous financial year’s revenue performance against revenue
budget estimates and revenue projections for the next three years;
??Sector performance in previous financial years (expenditure and
service delivery) measured against set performance targets;
??Indicative allocations and sector objectives and performance
targets for the next three years.
??Sector unfunded priorities and reallocations of funding.
??Draft Annual Work Plan and Budget Estimates, setting out in detail
the budgetary inputs, activities, and expected outputs and outcomes
within the various sectors during the coming financial year.

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 General Guide to the Local Government Budget Process

The Local Government Budget Framework Paper, if properly prepared and

used, will provide councillors with the information required to make
decisions that link-up inputs and activities with intended results or outcomes
(goals set in the Poverty Eradication Action Plan).

3. The Budget, which alongside the annual workplan make the

integrated annual performance and financial plan for the coming financial
year, sets out:
?? The expected revenues available to the Local Governments in
detail.
?? The allocation of funds to different parts of the Local
Government for the achievement of the activities and outputs set out
in the Annual Workplan in detail.
The final annual work plan together with the budget is being presented to
Council for approval. Once approved, the budget is a legal document by
which the Council authorises the Local Government Administration to spend
money on its behalf in order to carry out council programmes. The DDP,
BFP, annual workplan and budget are all linked so that at any stage an
activity can be identified in the DDP.

3.2 Increased Decision Making Powers under the Fiscal Decentralisation

Strategy

To date Local Governments have actually had little power to allocate funds in line
with their local needs and priorities, as the vast majority of funds transferred to
Local Governments have been as conditional grants, with fixed amounts for
specified purposes. The Fiscal Decentralisation Strategy changes this, and brings
in increased flexibility, and better systems that enable Local Governments to
decide on programmes and investments that are in line with Local Governments’
needs and priorities.

The Local Government Budget is made up of a recurrent budget, and a capital

development budget. The recurrent budget refers to the financial plan for the
running of the day-to-day routine programmes within a government, such as health
services, and education in primary schools. The capital development budget is the
budget for investment activities, which tend to be one off, such as the building of
schools and health-centres, and the training of teachers and nurses. The Fiscal
Decentralisation Strategy has two systems, the Recurrent and Development
Transfer Systems that streamlines the transfer of funds from the Central
Government.

Local Governments have flexibility over the allocation of recurrent sector

conditional grants between and within sectors. Initially, local governments will be
allowed to reallocate up to a maximum of 10% of grant funds from one priority
sector department to another, and from one sub-sector to another, within the

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 General Guide to the Local Government Budget Process

recurrent budget. The total allocation for conditional grants will remain the same.
Every year, the level of overall flexibility will be determined for each Local
Government by the Local Government Budget Committee after the annual local
government reviews. The flexibility can be increased or decreased by the LGBC.

Up to 5% of the non-wage sector grant within a sector can be allocated to fund

activities in sector administration, which directly support the implementation of
programmes, such as inspection, monitoring and support supervision. General
administration and non-priority sectors/sub-sectors will not receive conditional
grant funding, but will be funded from the unconditional grant, local revenue and
any available donor resources.

In the development budget, the source of flexibility comes from the discretionary
Local Development Grant, which Local Governments can allocate towards any
investment, so long as it is identified in the DDP. Central government sector
conditional grants for development expenditures, such as the Primary Schools’
Facilities Grant, will be allocated to priority sub-sectors within the development
budget. These allocations, unlike those for recurrent sector grants will be fixed.
The Local Development Grant and sector grants will be fully integrated with current
development planning systems. Local Governments at every level will be able to
make better decisions which meet their needs and priorities, because they will be
fully responsible for identifying and planning for investments in their areas via the
DDP.

The Executive will provide lower local governments with Indicative Planning
Figures for sector grants and the local development grants simultaneously, and on
the basis of this Lower Local Governments will make decisions on which
investment in which sector to undertake in the following financial year. These lower
local government decisions will be compiled by the Budget Desk and then the
decisions will be made on how to allocate the district/municipality share of the local
and sector development grants.

Local Governments at each level will be required to make contributions from own
revenue towards local investments. The recurrent implications of investment
decisions in the development budget must be taken into account in the second
year sector allocations of the medium term budget framework, and before a sector
investment can be approved.

3.3 Flexibility Requires Prioritisation

The FDS brings greater flexibility and autonomy for Local Governments in making
decisions on the allocation of expenditures. Given the new flexibility in the budget
process, the process of prioritisation becomes very important.

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 General Guide to the Local Government Budget Process

Local Councillors are ultimately responsible for the decisions made during the
budgeting process and they therefore need to be fully engaged in the decision
making process both within the sector committees, and council as a whole.
Prioritisation is the process of identifying unfunded priorities and allocating
resources to meet them in accordance with inter-sector priorities identified in the
DDP.

Each Local Government is able to reallocate up to a maximum percentage fixed by

the Local Government Budget Committee of the recurrent budget within and
between sectors. Initially that percentage is 10%. The DEC will fix a flexibility
percentage up to the maximum allowed.

To fund that flexibility, the budget call circular will deduct from each sectors
indicative allocation a percentage of the total in line with the percentage fixed by
the DEC. The total amounts deducted will be pooled together and will form the
fund from which reallocations will occur to meet unfunded priorities.

3.4 No Budget, No Central Government Grants

Section 83(4) of the Local Government Act requires that Local Governments pass
a budget not later than the 15th June. The Finance & Planning Committee and the
Executive Committee, together with the Budget Desk should take into account this
time limit when arranging the budgeting process. The budget is central to the
effective implementation of programmes, and the reading of and subsequent
approval by council of the annual work-plan and budget will be a pre-condition for
disbursement of central government funds via the recurrent and development
transfer systems to Local Governments.

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 General Guide to the Local Government Budget Process

Illustration of the Prioritisation Process using the Recurrent Budget Flexibility

Education Health
Sector Sector

10% flexibility
10% flexibility

A: Overall sector
90% 90%= Overall
grant ceilings
minimum minimum ceiling
communicated by
allocation allocation
MoFPED

re-allocation

10% flexibility
10% flexibility

90%=
90%=
B: minimum
minimum
Prioritisation allocation
allocation
by council

reallocation
10% flexibility New budget for
PHC
= gross sector
C: Result of 90%= 90%= grant
+
prioritisation minimum minimum
reallocation
allocation allocation
from primary
education

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 General Guide to the Local Government Budget Process

3.5 More autonomy means a greater focus on results

The reasons for providing Local Governments with more flexibility in decision
making is that it enhances their ability to generate poverty reducing results from
their expenditures. The implementation of the Fiscal Decentralisation Strategy
marks a shift in the traditional focus on expenditure control and compliance with
government requirements and regulations - towards output and outcome
performance evaluation. Councillors and central government agencies will have
better tools to assess the extent to which Local Governments are performing
against set medium-term targets and long-term objectives, many of which are set
out in the Poverty Eradication Action Plan.

The test of a good budget is in its implementation – Local Governments must

attempt to stick to budgeted expenditures and workplans. The shift in orientation
towards planning and budgeting for outputs and outcomes and measuring
performance against these does not imply that traditional financial accountability
requirements are being relaxed. It merely means that traditional compliance control
mechanisms are being supplemented by mechanisms to capture end-results, thus
enabling the political leadership to inform the public about the progress in
combating poverty over time and across the country.

3.6 Implementing the Budget - Better Performance will mean more central
allocations

A Local Government administration will be required to report on both expenditure

and output performance against the annual work-plan and budget, both to council
and to central government. Councillors need to ensure that their administrations
adhere to their budgets and workplans, and scrutinise the achievement of results.

Central Government will also monitor this, and measure sector performance as
new element of the national assessment process of local governments, which will
now take place in September. Good performing local governments will be
rewarded both in terms of increased Local Development Grant and Sector Grant
Allocations, as well as in increased flexibility in the recurrent budget.

3.7 What is needed for a successful budgeting process?

The budget process is where some of the most important political activities occur
and decisions and decisions are made during the year. The process involves
consultations and negotiations between the council and various relevant parties,
compilation of planning and budgeting inputs from lower levels of local
government, preparation of the budget framework paper, public hearings, the
prioritisation process and eventually reading and approval of next years budget

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 General Guide to the Local Government Budget Process

However, the budget process can be organised in many ways and may vary
slightly from one local authority to another and from one year to another.
Notwithstanding these variations, which are often due to different financial and
political conditions, a democratic, participatory and transparent budgeting process
is, however, based on the same principles.

In order to prepare a proper budget, three preconditions should be met:

?? The preparation process has to consultative and participatory in order to
ensure ownership to both the process and the approved budget;
?? A systematic process of prioritisation of programmes and expenditures,
which is based on informed choices, must take place.
?? Planned outputs, activities, and expenditure allocations in the annual work
plan and budget estimates must be realistic, and achievable.

Therefore the following criteria for a successful budgeting process should be

applied:
?? The full council must be at the centre of the process so as to avoid
monopolised and biased prioritisation and expenditure choices;
?? Sufficient time must be reserved for participation and dialogue between
relevant stakeholders and for public hearings;
?? Councillors must be provided with well-arranged and accessible budget
material that gives a clear financial overview of past financial and output
performance and the current and anticipated financial position of the
council;
?? Clear linkages between plans and budget, including recurrent cost
implications of capital investments and development projects;
?? Possible scenarios and the consequences of different choices have been
provided as a basis for political discussion and decision-making.

4 The budget process – 3 Stages

This section goes step by step through the local government budget preparation
process, highlighting major events, and the roles of stakeholders in each stage.
Please refer to the Local Government Budget Calendar at the start of this volume.

4.1 Stage 1: Preparing for the Budget Process

Planning and budgeting takes time and a well arranged planning and budgeting
process secures that the politicians have enough time for consultations the
communities in their constituencies and other relevant stakeholders; enough time
to make themselves acquainted with the budget material and to decide on their
priorities. The Budget Desk also should be given due time to the compilation of
planning and budgetary inputs, preparation of the Budget Framework Paper and
preparation of draft and final budget.

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 General Guide to the Local Government Budget Process

Quite a number of stakeholders need to be actively involved and consulted and

numerous activities have to be carried out before the budget is ready for
presentation to the council. The planning and budgeting process involves lower
levels of local governments, NGOs, sector ministries, the Local Government
Budget Committee and the Ministry of Finance, Planning and Economic
Development. All stakeholders have a voice and all levels have been assigned
specific functions and respons ibilities during the process.

The budget process needs to be well planned in advance, with a clear timetable of
events, and, crucially, funding made available for the holding of these events.
Involvement of the full council in the decision-making is costly, however it helps in
ensuring more balanced and widely owned decisions being made.

Step 1: Meeting of the Local Government Budget Committee.

Before the start of the planning and The Local Government Budgets
budgeting process, the Local Government Committee (LGBC)
Budget Committee (chaired by the Local The LGBC is be responsible for:
Government Finance Commission and - The negotiation and agreement of
allocation formulae and grant
composed of representatives from Ministry of conditions between sector ministries
Finance, Planning and Economic and local governments.
Development, key sector ministries, Ministry
- The identification of issues for
of Local Government, ACFO, ATC, ACAO, inclusion in the National Budget
ULAA and UAAU), which is responsible for Framework Paper from analysis of
coordinating the LG budget process Local Government BFPs
nationally, will meet in September to review - Advice on the acceptance/rejection of
local government performance in the amendments to conditional grant
previous financial year and agree upon allocations within the RTBs.
modalities and conditions for the planning - Overseeing the performance of the
and budgeting process, including – among Comprehensive Local Government
other things - the flexibility for reallocations Assessments.
between and within sectors.

If the Local Council has any issues that they wish to be considered by the Budget
Committee it should write to their respective LG associations and the Chair of the
Local Government Budget Committee within the Local Government Finance
Commission.

Step 2: Holding of National Budget Conference.

In October the Ministry of Finance, Planning and Economic Development holds the
National Budget Conference. The purpose of this event is to discuss and
communicate national priorities, overall sector budget ceilings, and local
government sector allocations. The National Budget Conference is one of the key

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 General Guide to the Local Government Budget Process

events at the start of the local governments’ planning and budgeting process, and
districts and municipalities should make sure that key players in the budget
process attend this workshop (i.e. the chairperson, the Secretary to the Planning
and Finance Committee, the CAO and the chairperson of the Budget Desk).

Step 3: Holding of Regional Local Government Framework Paper Workshops.

In late October the Ministry of Finance, Planning and Economic Development

conducts Regional Local Government Framework Paper Workshops primarily for
members of the Local Government Budget Desk, heads of departments and key
politicians. These workshops are of critical importance to local governments since
they inform individual local governments about the budget ceilings for both
recurrent and development
The Local Government Budget Call: grants. The Finance and
The Budget Desk is to issue Local Government Budget Call
in November/December to accommodate & kick-start the Planning Committee or the
development planning and budgeting process. It will Executive Committee, as the
contain the following information: case may be, will make sure
Activities, events and timing of the Budget Process that the political leadership –
?? Timing of activities and dates of submission for if it did not attend – is kept
contributions to budget documents
properly informed about the
?? Who is responsibility for each submission
Resource Projections and Indicative Sector Ceilings budgeting guidelines and
?? Overall medium term revenue projections for the grant allocations
local governments and indicative sector allocations communicated by Ministry of
?? Indicative sector budget ceilings and minimum Finance, Planning and
grant allocations for the recurrent budget Economic Development in
?? Indicative planning figures for sector and local
the workshop.
development grants for lower local governments
Formats and Technical Procedures for Preparing Budget
Submissions Step 4: Issuing of Local
?? Technical instructions for department heads on Government Budget Call.
planning and budget submissions
?? Standard formats to be applied for development Within one week of the
plans and workplans
Regional Local Government
?? Formats for submission of budget estimates
?? Formats for presenting un-funded priorities andFramework Paper Workshop
possible areas for cuts. in early November, the
Budget Desk should prepare
a Local Government Budget Call and circulate it to all stakeholders involved in the
budget preparation1.

The budget call sets out the timing of events in the budget process and what is
expected of key stakeholders involved. The budget call also specifies the
maximum percentage flexibility fixed by the DEC to be applied for intrasector and
intersector reallocations in accordance with FDS modalities.

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 General Guide to the Local Government Budget Process

It also sets out resource projections and indicative sector recurrent and
development allocations for heads of departments and lower local governments,
based on medium term allocations agreed in the previous budget framework
paper. These allocations will be decreased by the percentage stated by the DEC
as the applicable flexibility percentage for recurrent reallocations. These
deductions will be totalled by sector and aggregate and form the pool to meet the
costs of unfunded priorities prioritised later in the budget process. The standard
formats for performance reviews, expenditure allocations and development and
recurrent workplans, including activities and preliminary costing, to be carried out
by sector departments, should be included.

The notice will also contain the decision of the DEC in respect of those areas
which the local government has determined are priority areas for reallocation of
funds in accordance with FDS modalities. This is to ac t as a guide to the sectors in
preparing and identifying unfunded priorities for later consideration in respect of the
reallocation of the pool of funds available.

The notice will also be submitted to lower-level governments, who are to contribute
to both to recurrent service delivery budgets, and prepare their development plans.
The officers in lower local government responsible for co-ordinating development
projects will ensure that villages, divisions and wards start planning of development
projects to be incorporated into district/urban councils’ development plan.

The Budget Call also articulate the role of the District Technical Planning
Committee, which will compile and co-ordinate sector plans from lower level local
governments and draft the district/urban authority development plan.

4.2 Stage 2: Preparing the Local Government Budget Framework Paper

The process of preparing the budget framework Paper is, perhaps, the most crucial
stage of the budget process, as it is during this time that the widest consultations
on the Local Government’s budget strategy takes place, and prioritisation of
expenditures and programmes are made. The process of sector prioritisation and
setting of performance targets, alongside the lower local government planning
process helps inform the prioritisation process carried out by Council in the Budget
Conference.

Step 5: Preparing Sector and LLG inputs for the Development Plans

Step 5a: LLG identify investments & prepare development plans

Lower Local Governments review performance against their previously planned

and identify the activities they wish to carry out under sector development grants

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 General Guide to the Local Government Budget Process

over the medium term and compile development plans. This involves allocating
their share of the discretionary local development grant to sector investments.

Step 5b: Preparing sector development plans and development budget2

The planning unit compiles the LLG plans, and combined LLG sector allocations
are distributed to sectors. Departments then review the planned LLG sector
investment decisions, and allocate the district share of sector grant allocations and
LDG allocations. They then prepare the sector element of the development plan.
They also identify and prioritise any unfunded sector investments, in line with the
Budget Call identification of priority areas.

Once the development plan and budget proposals have been prepared,
departments complete the draft sector budget framework paper in accordance with
the DDP. Sectors must ensure that they take care of the recurrent implications of
investments being made in the current FY, and also for planned investments in the
budget year in year 2 of the medium term allocations.

Step 5c. Each sectors must incorporate into the DDP all activities, whether
recurrent or development, of the local government, whether funded by central
government, local revenue, unconditional funds or donors. This requires an
analysis of the National Sector Policy by the sector and the planning of those
activities that each sector decides are those that it will undertake in order to
implement the NSP.

Step 6: Sector Departments prepare input for Local Government Budget

Framework Paper

Once they receive the budget call Heads of Department should form small working
groups to prepare the sector input for the Budget Framework Paper. Sectors
review performance against previous workplans, and budget against expenditure.
They then prioritise expenditures within the indicative budget ceilings providing to
them, justifying allocations in terms of medium term objectives (which must appear
in the DDP), past performance and expected outputs. Allocations within the sector
budgets should be linked to the achievement of service delivery targets.
Departments propose reallocations of conditional grants between the sub-sectors
within the sector in line with local priorities as determined by the Budget Call,
however it must be ensured allocations to budget lines must not go below the
minimum levels prescribed in the LG Budget Call.

To facilitate the prioritisation process, sector committees will identify

expenditure areas from where reallocations to other priority areas can
be made

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 General Guide to the Local Government Budget Process

Step 7: Sector committees review sector input to the budget framework paper and
development plan

In December the sector committees review sector input to the budget framework
paper, and development plan including past sector performance, preliminary sector
allocations, unfunded priorities.

The output from the sector committee meetings will be submitted to the Budget
Desk for incorporation in the draft budget framework paper.

Step 8: Compilation of the draft Budget Framework Paper, and Spending Options
Table

The Budget Desk then compiles the draft budget framework paper, and the
planning unit then completes the compilation of the draft District Development
Plan. Also, crucially to the prioritisation process, the Budget Desk also compiles a
table of spending options for the recurrent budget and capital development budget.
This table listed the identified unfunded priorities to accord with the priority areas
identified by the DEC in the Budget Call and the available pool of funds to meet
those priorities. These are then submitted to the Technical Planning Committee, at
which they are discussed.

The committee, assisted by the Budget Desk, will undertake a technical

examination of the contributions from the standing committees. The technical
examination aims to ensure that budget proposals are realistic and consistent with
councils’ policies, the available resources and national policies.

Step 9: In December, the Executive Committee, Chairpersons of Sector

Committees, and Heads of Department review the draft budget framework paper
and development plan.

A meeting of the Executive, Chairpersons of Sector Committees and Heads of

Department is then convened to review and discuss the draft BFP and DDP, and
prioritise sector expenditures. The meeting reviews the ranking of the unfunded
priorities proposed by sector committees in the BFP and takes preliminary
decisions on what should and should not be funded from the available pool of
funds. This includes agreement on which sector investments to be funded using
the district share of the Local Development Grant.

On the basis of the contributions from the chairpersons of standing committees

and the executive, and with technical consideration of the estimates, the Budget
Desk prepares the draft of the annual & medium-term revenue and expenditure

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 General Guide to the Local Government Budget Process

budget to be included in the budget framework paper3. Upon endorsement of the

draft budget framework paper by the Executive Committee time has come for the
annual local government budget conference, which has been institutionalised in
local governments throughout the country as part and parcel of the local
government budget cycle.

Step 10: Holding of Budget Conference

In late December the Budget Conference takes place. The Budget Conference,
which will normally be structured in accordance with the structure of the budget
framework paper, aims to:

?? Inform the full council and other participants about the previous years
financial performance (revenues as well as expenditures);
?? Inform the full council about the previous years achievements and
shortcomings (based on an assessment of outputs and outcomes achieved
against resources spent and activities carried out).
?? Present and discuss sector objectives, development programmes & projects
and associated budget implications.
?? Review the prioritised interventions including proposed re-allocations across
sectors and within budget lines.
?? Reach consensus about objectives, priorities and budget allocations in order
for the Budget Desk to prepare a final draft budget framework paper,
including a tentative annual and medium-term revenue and expenditure
budget.

The budget framework paper will guide the council through the process and
concentrate on following activities:
i) Review of previous years’ past revenue performance & medium -term
revenue projections (prepared by the Budget Desk and normally to be
presented by the Chief Finance Officer)
ii) Review of previous years expenditure and output performance &
medium-term expenditure estimates
iii) Presentation and deliberation of the development plan, including sub-
council development plan inputs
iv) Prioritisation and ranking of recurrent and development activities, including
unfunded priorities, and potential areas for cuts
v) Setting of medium-term objectives and performance targets based on
resource input & activities (outlined in the annual work plan and included in
the budget framework paper) against planned outputs and outcomes

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This involves amending the allocations made in the budget call.

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 General Guide to the Local Government Budget Process

vi) Allocations according to priorities and development projects agreed upon

based on available local revenues, donor funds and the 10% flexibility to
reallocate across the sectors/sub-sectors and between budget lines.

The Budget Desk will on the basis of the output of the budget conference make a
final draft of the budget framework paper and prepare the medium-term budget4.

Step 11: Finalisation of budget framework paper to be submitted to Ministry of

Finance, Planning and Economic Development

After the Budget Conference, the Budget Desk prepares the budget framework
paper and draft budget to be presented to the Executive Committee, who in turn –
upon endorsement of the document – submits it to Ministry of Finance, Planning
and Economic Development, by the deadline specified in the National Budget Call
which will usually be the 31st December.

4.3 Stage 3: Finalisation and Approval the Annual Workplans and Budget

The third and final stage of the budget preparation process is the finalisation of the
workplan and budget, and the presentation to and approval of the budget by
council.

Step 12: Ministry of Finance, Planning and Economic Development reviews local
government budget framework papers and draft budgets and set final budget
ceilings

During the January the Ministry of Finance, Planning and Economic Development
reviews local governments budget framework papers, checks that conditional grant
reallocations are consistent with the minimum allocations, and reviews LGD
allocations. Upon completion of the review, issues are incorporated into the
LGBFP and amendments to grant allocations integrated into the MTEF. The
National BFP is submitted to Cabinet, and once it has been passed, the local
governments will receive final budget ceilings, thus enabling them finalising their
annual workplan and budget estimates in April or May.

Step 13: Budget Desk revises budget frame work paper and draft budget

Once comments and final budget ceilings have been received from the Ministry of
Finance, Planning and Economic Development in May, the Budget Desk informs
heads of departments and sector committees, and lower local governments of
changes to the grant ceilings for their final input to the process.

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 General Guide to the Local Government Budget Process

Step 14: Sector committees review final draft annual workplan and budget

By the beginning of June heads of departments will have finalised their workplans
and the sector committees will then review the final draft workplans and draft
budget estimates assisted by the Budget Desk. Similarly Lower Local
Governments will have revised their development plans. The input from the sector
committees serve as a final input to the meetings to be held in the Finance and
Planning Committee and the Executive Committee respectively. The Executive
Committee may, if need be, hold consultations with individual sector committees or
the Finance and Planning Committee to clarify outstanding issues.

Step 15: The Executive Committee finalises annual workplan and budget

In the beginning of June the Executive Committee, assisted by the Budget Desk,
finalises the annual workplan and draft budget to be read in a council meeting to
be held at the latest at the 15th June.

Step 16: Reading and approval of budget by council

At the council meeting for the reading of the budget, which is to be held at the
latest the 15th June the chairperson of the council (or the Secretary to the Finance
& Planning Committee) will present the development plan, the annual workplan
and budget to the council. The budget meeting gives all councillors the opportunity
to debate the budget proposal, and the prioritisation of those activities to be
incorporated in the budget. If possible any outstanding issues on the budget should
be resolved and the budget should be approved at the meeting. The approved
budget is legally binding and should be communicated to the public.

Flexibility in Budget Formulation If the council is unable to resolve the

and not Implementation outstanding issues on the budget proposals at
It is important to note that the the budget debate, it should instead approve
flexibility in the recurrent and vote on account. The budget issues should
development budgets are provided then be resolved within 3 months and the
at the time of budget formulation
only. Once sector grant allocations budget subsequently approved.
have been amended and the LDG
The chairperson of the council shall sign the
allocated, these allocations should
remain fixed, and be adhered to approved budget/vote on account on behalf of
during budget implementation.
the council. A copy of the approved
There will be no flexibility to
budget/vote on account shall be submitted to
reallocate conditional grants during
the financial year. the full council, Ministry of Local Government,
Ministry of Finance, Planning and Economic
Development and the Local Governments Finance Commission. This will trigger
the disbursement of central government funds to the Local Government in the
following financial year.

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 General Guide to the Local Government Budget Process

The local government’s which only approve vote on account at the time of the
reading of the budget must ensure that the budget is approved within the 3 month
statutory deadline, otherwise grant disbursements will be withheld from October.

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