Sunday May 31, 2020

Ghana’s Decentralisation Policy and the Common Fund

Decentralisation and Governance

Decentralisation refers to the transfer of power and authority on a geographic basis to local government units or special statutory bodies. Decentralisation is a mechanism for bringing government closer to the governed and helps to improve public administration by empowering local authorities to be the planning and decision-making bodies and thereby enhancing the capacity of government to achieve local participation.

Government's Commitment to Decentralisation

The Government has emphasized its commitment to pursue a vigorous and progressive deepening of decentralisation and devolution of power. The decentralisation policy provides an opportunity to involve more people and more institutions in the formulation and delivery of development policy for poverty reduction and growth. It is expected to maximize the use of human resources, optimize equity and provide a basis for accountability and transparency.

The present decentralisation system is the most serious and sustained attempt so far in Ghanas history. It was introduced in 1988, when the Provisional National Defense Council (PNDC) initiated some reforms in local government. The Local Government Law, 1988 (PNDCL 207) was enacted to give legal backing to the new local government system. The 1992 Constitution of Ghana made decentralisation mandatory and provided that Ghana put in place ...a system of local government and administration which shall, as far as practicable, be decentralised (Article 240 (1) of the 1992 Constitution). The Constitution tasked Parliament with enacting appropriate laws to ensure that functions, powers, responsibilities and resources are at all times transferred from central to local government authorities in a coordinated manner. Thus, in 1993, Parliament enacted a new law, the Local Government Act, 1993 (Act 462) to replace PNDCL 207, though basically the same in character.

Under the law a Metropolitan, Municipal or District Assembly (MMDA) is the pivot of administrative and developmental decision-making at the local level and is assigned with deliberative, legislative and executive functions. The Assembly is responsible for bringing about integration of political, administrative and development support to achieve a more equitable allocation of power, wealth and geographically dispersed development in the country. The Assembly is also the planning authority in the


The Assembly has the authority to prepare and implement development plans and to draw up budgets for implementing the development plans. The Assemblies are expected to mobilize resources, develop local infrastructure and promote the development of local productive activities with the help of some central government institutions, also decentralise and operate as part of the Metropolitan, Municipal and District Assemblies.

In sum, it is the responsibility of these local authorities to ensure development, peace and security in their various jurisdictions in a participatory manner.

Fiscal Decentralisation and Problems in Decentralization

Section 240 (2) ( c) of the Local Government Act provides that each local government unit shall have a sound financial base with adequate and reliable sources of revenue. Despite this requirement, many MMDAs have a limited number of sources of revenues for carrying out their activities.

Apart from the Common Fund, the Assemblies can also receive grants, land rates, mineral royalties, transfers, ceded revenues and external credits. They are also expected to engage in activities that can generate revenues, (Internally Generated Fund, IGF) to be used for their administrative and other operations. However, many of them lack the capacity to develop revenue generating activities while others are unable to generate sufficient revenue internally because of the deprived circumstances of their Districts.

Currently a majority of the Assemblies depend unduly on the DACF for their operations and projects. The DACF has significant central government involvement particularly with regard to the times when the monies are released by the Ministry of Finance. These factors make it difficult for most of the Assemblies to achieve the financial autonomy necessary for a properly decentralised administration.

The District Assemblies Common Fund

Decentralization can lead to severe imbalances in the regional distribution of wealth and development, as the resources of local authorities are often unequal. This explains why, and in view of the problems most of the MMDAs face in generation their own revenues to meet their financial commitments and to give effect to the Decentralization programme, there was the need for the setting up of the DACF.

Article 252 of the Constitution provides for the setting up of the DACF to serve as a mechanism for the transfer of resources from the central government to the local authorities (the MMDAs). The Articles provides that at least 5% of Ghana’s total national tax revenue should be paid into the Fund for distribution to the local level authorities, mainly to undertake development projects. To operationalise this constitutional provision, Parliament enacted the District Assemblies Common Fund Act (Act 455) in July 1993 to provide further legislation and detail on the administration of the Fund.

This Act defines total revenue 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 District Assemblies under any enactment in force’’. In effect, it is only tax revenue collected by, for or on behalf of central government that is covered by this definition. The distribution of the Fund is based on formula developed by the Administrator and approved by Parliament. The Administrator uses the approved Formula only in distribution the Fund.

Office of the Administrator

Though the Administrator is appointed by the President with the approval of Parliament, he/she works independent of them except for seeking approval of the formula from Parliament. The Administrator has a 4-year term of office and is eligible for re-appointment. A number of other government agencies are also involved in the administration and supervision of the use of the Fund. It is the MMDAs that actually utilise the Funds.

The President also has the responsibility of appointing the staff of the Common Fund although he/she can delegate this power to the Administrator. The Ministry of Finance (MoF), the Ministry of Local Government and Rural Development (MLGRD), and the Controller and Accountant General’s Department (CAGD) are involved in the disbursement and supervision of the Fund.


Information is culled from, “A Report On Tracking Of The District Assemblies Common Fund: A Pilot Study Of Four District Assemblies,” (By Rudith King , Vitus A. Azeem, Charles Abbey, Samuel Kwaku Boateng , Donkris Mevuta Accra, August 2003