This research wasintended to describe the degree of fiscal decentralization in the autonomous regions in East Javaprovince in 2006-2010. This research belongs to the genre of secondary data with quantitativedescriptive type. The population in this study was all regencies/cities in East Java Province. Thedegree of fiscal decentralization was calculated from data collected by the three ratios, that is: a)PAD (Local Revenue) with TPD (Total Local Revenue); b) BHPBP (Tax and Non-Tax Sharing)with TPD; c) regional contribution to TPD. The research results showed that, first, seen from theratio of PAD to TPD, DDF (Degree of Fiscal Desentralization) of regencies/cities in East Javain 2006-2010 was in very low category with an average DDF percentage of 8%. Second, DDFof regencies/cities measured in terms of ratio of local contribution and TPD, had a high level ofDDF, reaching 83%. Third, DDF of regencies/cities in East Java in 2006-2010 of BHPBP ratiowith TPD had a very low percentage, reaching an average of only 9%, so the regionâs financialdependence on the construction financing of central government funding is very high. Keywords : regional autonomy, fiscal decentralization, degree of fiscal decentralization.
This dissertation aims to explain the nature, cause, and consequence of informal fiscal decentralization in China since 1994. The 1994 tax reforms intended to strengthen the central government taxing power by increasing tax revenue through the tax assignment system. China also prohibited local government debt taking, while increasing intergovernmental transfers between the central government and local government. These series of China's centralization reforms in 1994 have realized uneven success. Central government tax revenue was improved significantly. However, local government still takes debt through the financial platform companies. The increased intergovernmental transfers did not decrease regional disparity, which is one of the goals of the central government. These are the unintended consequence of the centralization reform that this study tries to account for. This study shows that revenue centralization unintentionally aggravates problems of local public finance. While maintaining the budget balance according to budget law, local government has carried out competitive economic growth and expenditure management. The ability to manage expenditure and attract investment is the criteria employed to evaluate the accomplishment of local leaders. This study finds that prohibition of local government debt in China is constrained by their social network. This norm influences the strategy of local governments to increase their debt taking beyond the realm of formal rules under the competitive environment. This study also demonstrates that centralization of revenue made local governments increasingly resort to intergovernmental transfers, which in turn fail to reduce inequality across jurisdictions. This study argues that an informally decentralized state reduces the merits of the decentralization. The informal consequence of the political and fiscal systems in China result in local leaders that acquire the medium level of change in power, while pursuing fiscal decentralization and maintaining political centralization. However, the unintended consequence is the retreat of the fiscal system, such as the increased fiscal instability and large gaps across jurisdictions.
In 1991, Indonesia began a process of decentralization in the health sector which had implications for the country's public hospitals. The public hospitals were given greater authority to manage their own personnel, finance and procurement, with which they were allowed to operate commercial sections in addition to offering public services. These public services are subsidized by the government, although patients still pay certain proportion of fees. The main objectives of health sector decentralization are to increase the ability of public hospitals to cover their costs and to reduce government subsidies. This study investigates the consequences of decentralization on cost recovery rate of public hospitals at district level. We examine five service units (inpatient, outpatient, operating room, laboratory and radiology) in three public hospitals. We find that after 20 years of decentralization, district hospitals still depend on government subsidies, demonstrated by the fact that the cost recovery rate of most service units is less than one. The commercial sections fail to play their role as revenue generator as they are still subsidized by the government. We also find that the bulk of costs are made up of staff salaries and incentives in all units except radiology. As this study constitutes exploratory research, further investigation is needed to find out the reasons behind these results.
TWith the help of the available literature, the paper attempts to assess critically the main problems of municipal finances in India and to bring out the challenges that the municipalities face with respect to revenue generation and expenditure management. The main findings suggest that the urban local bodies in India are confronted with lack of proper decentralization of functions and finances, inadequate revenue generation, expenditure shortfalls leading to poor service delivery. It also analyses the suggestions and recommendations that have been offered in the literature to cope with these critical challenges relating to urban finance.
Elites often use social policies to garner political support and ensure regime survival, but social policies are not a silver bullet. Using two waves of Chinese national surveys, I find that a recent policy of abolishing school fees has significantly increased citizensâ demand for greater government responsibility in financing compulsory education. I argue that policy awareness, rather than policy benefits, drives citizensâ demand. Finally, I show that policy awareness has enhanced citizensâ trust in China's central government, but not in local governments. This asymmetry in regime support has two sourcesâthe decentralization of education provision and biased media reportingâwhich induce citizens to credit the central government for good policy outcomes. Given that citizensâ responses are primarily influenced by policy awareness that is promoted by the state media, this study casts doubt on the use of social policies to sustain long-term political support.
Housing decentralization not only positions housing sector as regional obligatory, but also triggerspublic expectations upon the improvement of housing conditions. Various weaknesses of centralizedsystem that full of generalization in housing policy makes decentralized system is interpreted as aninnovative renewal process. However, the central government still does a lot of intervention towardhousing program. Limitation happens to local government such as limitation in housing finance,weakness in coordination ability, and less established of local bureaucracy makes intervention fromcentral government in housing program financed by APBN always dominates. The least contributionfrom local government on public housing sector in decentralization era creates paradox. It is caused bythe Ministry of Public Housing (Kemenpera) that cannot perform fully as substitutional institution rolein managing housing in local area. Kemenpera position as ministerial cluster 3 makes them does nothave representative office in local area. Thus, there will be potential of a repeat experience in the past, inform of generalization in housing policy, that complicates the housing problems itself.
The year 2013 is already the ninth year of implementing fiscal decentralization in the Slovak Republic. The aim was to ensure independence as well as responsibility of subnational governments and improve the ability to finance their original competences from own sources. As decentralization leads to growth of imbalance intergovernmental transfers are the instruments used by central government to reduce fiscal disparities and fill the gap between the spending needs and fiscal capacity of some local authorities. Tax sharing system in Slovakia, is an important tool of horizontal fiscal imbalance equalisation. Despite the title, shared taxes play the role of unconditional grants if even they are formally labelled as local government own revenues under current legislation. In this paper we examine the allocation of personal income tax share as an instrument of regional policy and factors affecting interregional disparities in Slovakia. The paper presents some results of the research project VEGA1/0822/11 Redistribution of financial resources in the decentralized fiscal system in Slovakia.
Egypt, currently in the throes of major political change, will likely undergo various reforms in the next few years. Some reforms are likely to give local entities, including schools, greater control over education finances. In 2007, the Government of Egypt began to decentralize some non-personnel recurrent finances from the Ministry of Education and the Ministry of Finance (MOF) to lower-level jurisdictions using a number of simple and transparent enrollment- and poverty-based funding formulas. By 2010, a sizable amount of capital expenditure was also being transferred to lower levels of the system via similar equity-based funding formulas. Prior to these formula-based decentralization efforts, a large amount of education-related non-personnel recurrent finances had been moving from the MOF to the muderiyat. Analysis of these latter allocations reveals that they are highly inequitable on an inter-governorate per-student basis, ranging from EGP 966 per student in New Valley to EGP 25 per student in 6th of October. This paper examines the nature and potential causes of this inequity and puts forth a way in which these funds could also be transferred using an equity-based funding formula that âholds harmlessâ those muderiyat that would lose absolute amounts of money under a more equitable distribution scheme.
The share of public investment spending at sub-national level has been slowly but steadily increasing over the past two decades across OECD countries. Degrees and forms of decentralization in infrastructure vary widely across countries, but all governments share a common objective, that is to mobilize authorities along shared infrastructure policy objectives. This involves managing a complex web of vertical (across levels of government) and horizontal (across sectors and across the same levels of government) interdependencies, which require substantial coordination among actors to ensure policy alignment and quality investments. Asymmetric information, multiple principal-agent relationships and significant differences in capacities across levels of government in financing and implementing infrastructure investments have posed important political economic obstacles to improving the efficiency and effectiveness of public investment outcomes. This paper will look at persisting coordination challenges more closely by using the results of a recent OECD questionnaire and case studies. It will identify remedies OECD and some selected non-OECD countries have found that work to address coordination issues. This paper will demonstrate that ultimately systematic collection and sharing of information is the key to making coordination work.
During the past three decades, a large number of countries have introduced reforms to decentralize public decision making. Such reforms have proved controversial. Critics of these reforms argue that decentralized provision of infrastructure enhances vulnerability to corruption. Proponents of these reforms counter that corruption arises from lack of people empowerment and decentralization by bringing decision making closer to people shines sunlight on government operations and empowers people to hold government to account and thereby offers potential for combating corruption in the long run. They further state that decentralized provision of infrastructure holds a great promise in upgrading infrastructure to underserviced especially rural areas with local self-government. In theory such decentralization is also expected to improve integrity of such operations especially in the event of local financing. These debates, nevertheless, remain unsettled as empirical evidence on the impact of decentralization on infrastructure provision is scant or non-existent. Empirical work is hampered by a lack of reliable data on the incidence of corruption. This paper presents conceptual underpinnings of the impact of decentralized provision of infrastructure on the incidence of corruption and synthesizes scant available empirical evidence to make a case for further empirical research to document the real world experiences to update our current state of knowledge on this subject. Much work lies ahead to limit our wide zone of ignorance in this area.
This paper proposes an economic logic for underpinning decentralization in the infrastructure sectors. It starts by detailing the definition of the infrastructure gap and the methodologies to calculate it. It provides some global trends for developing countries in terms of the gap and briefly discusses financing possibilities for developing countries to address the gap. Then it turns to the discussion of the link between the infrastructure gap and decentralization, providing a typology infrastructure subsectors and possible jurisdiction of service provision. It briefly discusses the potential for raising local finances for provision and the relationship between poverty and provision. While it is very difficult to provide blanket recommendations on decentralizing the various sectors and respective subcomponents of infrastructure services, the paper offers a set of guidelines to direct policymakers in their decision to decentralize or not. First, decentralization is intrinsically neither good nor bad for infrastructure; its impact depends entirely on the incentives facing the various decision-makers in the decentralization process; second, decentralization is most fruitful when the decision-makers bear the financial and political cost with respect to design, finance, operation and maintenance; and, finally, political leaders are accountable to their constituents for the manner in which they spend tax revenues and how they use and allocate transfers from the central government.
The subnational dimension of infrastructure emerges as one of the greatest challenges in contemporary public finance policy and management. Given the localized nature of most infrastructures, ensuring its efficient provision represents a challenge for all countries irrespective of their level of centralization or decentralization. This paper introduces the fundamental questions surrounding the provision of infrastructure in decentralized settings and summarizes the findings from a collection of original essays prepared for this volume by a set of worldwide experts on this subject with the objective of advancing our understanding of the interplay between decentralization and infrastructure. More specifically, the paper discusses the extent of infrastructure gaps and the quality of subnational spending; inquires how functional responsibilities, financing and equalization can be designed; discusses sector-specific arrangements; drills down to the key steps of the public investment cycle and management aspects; and analyzes the political economy and corruption challenges that typically accompany decentralized infrastructure projects. The paper also presents avenues for the strengthening of decentralized public investment and infrastructure provision processes, concluding that they need to be country-, sector- and place-specific. While it is clear that institutional arrangements for infrastructure management will vary across countries, in all cases several decision-making steps need to be coordinated across levels of government in order to ensure efficiency in delivery, equity in spending, and accountability over final results.
Johnatan Rafael Santana de Brito, JoĂŁo Ramos Matos Filho, Edward Martins Costa
the Brazilian tax structure has specific characteristics and the performance level of government. Although there was a better regulation of these transfers after the enactment of the Fiscal Responsibility Law, it is observed that the amount of resources transferred to the municipalities of Rio Grande do Norte is quite high. In light of the theory of federalism and fiscal decentralization, in particular, the theories related to intergovernmental transfers seek to diagnose the transfers from the systematization of information as to the origin, value and destination. We used the econometric model of Dynamic Panel System GMM in diagnosis and verification of the impact of transfers on public finances of municipalities in the RN, a dynamic econometric model that captures the lagged effects of variables making use of adjustment mechanisms based on a model differences distributed so that the dependent function is a concatenation of variable contemporary and out of phase. The data point to what is predicted in theory: an increasing trend of dependency. The paper presents some proposals for the transfer system and the composition of spending in order to contribute to greater tax efficiency.
The District Development Fund program or model was introduced in Lao People Democratic Republic in 2005, with the technical and financial support of United Nations Capital Development Fund, as a core part of the Governance and Public Administration Reform Programme, which was jointly supported by United Nations Capital Development Fund and United Nations Development Programme. The District Development Fund program was designed to be an effective approach and support methodology suitable for a low capacity environment in order to help deliver better public services to rural and remote communities in Lao PDR. The DDF has since been expanded to fifty two (52) Districts (of a total of 148 Districts) across the country. DDF aims to sustainably improve local public services delivery through the strengthening of capacity of local district administration and demonstrating improved financial management systems and procedures that can contribute positively in this objective. It does this by providing both discretionary development grants together with capacity development and support to improvements systems and procedures for local development. However, there has been little external research undertaken to date on âassessment of the District Development Fund program as an effective approach to strengthen public service improvement for decentralized and better service delivery in Lao PDR, and whether the District Development Fund program has positively affected the capacity of local authorities to delivery prioritized local public servicesâ. This article addresses this by looking at the empirical results from the DDF program and draws on experiences on how DDF program has been operating and contributing on the ground in building local capacities, in financial management, planning and budgeting, to enhance the local authoritiesâ ability to finance local priority services. The DDF for government has become the viability and positive results of empowering local authorities and communities as part of public administration reform, that is not only a government fund transfer mechanism a form of fiscal decentralization but also has proven to be very well suited to the low capacity environment in Lao PDR A better people-focused service delivery has mostly been achieved by empowering sub-national administrations to take a more effective role in leading local socio-economic development, which is to bring about tangible improvements in public services to people and a real reduction in local poverty. The most significant lesson of the DDF experience in Laos has been its ability to achieve results that have led to improvements in pro poor service delivery combined with improvements in the capacity of local administration in planning, budgeting and monitoring services. A critical lesson in achieving these results has been ensuring that new systems and procedures fully align with existing government processes . This not only helps to improve capacity development but also ensures innovations, which is more cost effective and scalable in future by working through existing governance systems. Greater district and community oversight and accountability result in funds being well spent with minimum leakages. This article, to a large extent, is entering new ground where there is little other independent research or documentation available. Thus the approach relies on conducting structured evaluation dialogue with the direct stakeholders, including the Ministry of Home Affairs, Governance of Public Administration Reform /District Development Fund project team, national and local practitioners and representatives of the communities involved, combined with a review of the available documents and data. The methodological tools used were interviews, workshops, focus group discussions, data analysis and document review. Keywords: Service delivery, Building capacity, Financial management, Planning and budgeting management, Local authority, District development fund approach.
David Nyange, David Tschirley, Hussein Nassoro, Abeid Francis Gaspar ¡ 8 authors
EXECUTIVE SUMMARY Rural taxation policy is a major issue in many countries of Africa as they pursue more decentralized forms of governing and at the same time work to enhance the effectiveness, efficiency, and fairness of their tax systems. Tanzania has struggled with this issue since at least 1962, when it expanded countrywide the limited decentralization that had occurred under the colonial regime, then abolished LGAs in 1972 in favor of âMadaraka Mikoani,â only to reinstate them and enshrine them in the constitution in 1984. With wide powers to set tax policy and practice at local level, made possible by the Local Government Finance Act (LGFA) of 1982, Tanzania soon experienced a dizzying array of taxes and fees, with dramatically differing rates across LGAs. The situation became so extreme that some claimed that Tanzania by the late 1990s had âabout 110 local authorities ... each with a different tax systemâ (Fjeldstad and Semboja 2000). A sustained effort at reform culminated in 2003, when the âhead taxâ and a series of ânuisance taxesâ were abolished, and the produce cess was limited to a maximum of 5% (compared to rates as high as 20% in the past). Though the resulting system of local taxation is substantially less complex, less variable across LGAs, and less onerous than it was prior to these reforms, important problems remain, and stakeholder demands for further reform have been growing. Since the produce cess became the most important source of local revenue after 2003, much of the demand for reform has focused on it. In response to these concerns, GoT included a commitment to âreduce or abolishâ produce cess when it signed the G8âs âNew Alliance for Food Security and Nutritionâ declaration. This study took advantage of a newly available database of LGA revenue and expenditure and complemented it with fieldwork in 27 LGAs with varying levels of reliance on the produce cess. Its overall purpose is to generate new empirical understanding that contributes to the on-going debate on produce cess and that informs the GoT on pros and cons of potential options for reform. Key new findings include: 1. Dependence on the produce cess varies widely among rural LGAs, from 0% of total locally generated revenue in Ngorongoro to 90% in Urambo; 2. Relative to the value of their marketed production, traditional export crops generate more than three times as much cess revenue as do food crops; 3. Much potential cess revenue goes uncollected: nationally, LGAs collect not more than one- quarter of the revenue potentially available from produce cess charges. This low level of collection reflects both limited human and institutional capacity at local level and widespread tax evasion, some of it likely featuring the collaboration of some local officials; 4. Because it is charged on the gross value of production, current cess rates can result in very high tax (even confiscatory) on net revenue among farmers that use a large amount of inputs but experience small net margins; Confirmed previous findings include: 1. With the reforms of 2003, local revenue fell sharply as a share of total LGA revenue, from 20% to a current level of 7%. Central government transfers provide the rest. Such a low share of locally generated revenue makes meaningful decentralization quite challenging. 2. Nationally, cess contributes only 1.8% of total LGA revenue, with other local taxes accounting for 5%; 3. Yet cess is the largest source of rural LGA own revenue, at 43%. Because this revenue is very flexible (it does not come with the spending dictates that accompany central government transfers), it is highly valued by local authorities, and is largely used for Councilor allowances and other âcosts of doing businessâ; 4. Cess rates are highly variable across LGAs, varying by a factor of as much as four (Beans in Handeni at Tshs 1000/bag vs. Lushoto at Tshs 4000/bag); 5. Tax evasion is widespread and likely a more serious problem than tax avoidance; 6. But avoidance â farmers or traders or others changing their production and marketing behavior due to the tax (and especially due to the variation over space in tax rates) â can be a serious problem in particular instances. For example, some sugarcane growers in Mvomero are considering shifting their farming activities to Kilombero due to lower cess rates in the latter; and farmers and traders report that traders favor some districts over others in their food trade due to differences in cess rates; Reform options include: 1. Abolish cess in one step 2. Gradual phasing out of cess 3. Reduce the cess rate, broaden its base, and improve capacity for collection 4. Institute a differential cess for food- and non-food crops 5. Completely remove cess in food crops, leaving it only for traditional and other export crops. Simple simulations of option 3 combined with option 4 (3% for traditional cash crops, 2% for food crops) indicate that LGAs would need to improve their efficiency in collection (the share of potential cess that is actually collected) from the current estimated 28% to 41% to maintain revenue, and would increase revenue with further improvements. Complete elimination of cess on food crops (option 5) would make LGAâs jobs quite challenging, especially if rates were reduced on traditional export crops. Leaving the rate on these crops unchanged at 5%, LGAs would have to achieve nearly 60% efficiency in their collection to maintain their current revenues; dropping the cess on traditional export crops to 3% while eliminating it on food crops would require an almost certainly unattainable 83% efficiency. Based on the analysis in the paper, and in keeping with the view that improvement in tax systems is a long-term process featuring continuous, incremental improvement, the report suggests that option 3 combined with option 4 â reducing the rate of the cess (thereby reducing its variability over space), introducing a slight differential between food crops and traditional export crops, and broadening the cess collection base by working continuously to improve the human and institutional capacity of LGAs to collect taxes in efficient and fair fashion, is likely to be the best option for Tanzania. Piloting of technological and institutional innovations such as the use of mobile money for cess payment are proposed as one way to address both the inadequate local capacity and the scope for corruption in cess collection.
This study focuses on the subnational governmentsâ revenues, their productivity and contribution to the total budget of the region. In Ethiopia, the regions get significant amount of revenue from the central governmentâs block grant and their revenue sources generate very small amount of revenues and their tax bases are also very narrow. The study describes the revenue contribution of tax and non-tax bases separately and their trends throughout the periods. Moreover, it distinguishes specific revenue sources and their productivity, consistency of revenues from specific sources to finance local needs, and challenges in administration of their own revenue sources. Key w ords : Fiscal federalism, block grant, tax revenues, non-tax revenues, government budget.
Jackson O Otieno, Paul A. Odundo, Charles M. Rambo
The Local Authorities Transfer Fund (LATF) is an intergovernmental transfer system, supplementing the financing of service delivery within the framework of fisc0al decentralization. LATFââŹâ˘s objectives are to improve service delivery, enhance financial management and accountability as well as reduce debts accumulated by local authorities. The purpose of this study was to establish the influence of LATF on service delivery by local authorities, focusing on Siaya Municipal Council. We gauged residentsââŹâ˘ perspectives about improvement of water supply, garbage collection, and sewerage services. We sourced primary data from 188 household heads and 202 market traders. The study found that 63.2% of the participants believed that there was no change in water supply consistency, while 69.5% reported the same about adequacy of water provided by the Council. Besides, 55.6% of the participants indicated that garbage collection had deteriorated, while 63.8% said the same about sewerage services. The findings suggest that access to LATF resources over the preceding decade had not improved service delivery in Siaya Municipality. Delivery of services was constrained by political interference (57.4%), procurement malpractices (44.1%), weak revenue base (38.7%), and understaffing (33.1%), among other factors. In view of this, local authorities should shape up to meet the current service demand, as well as gear up to address the needs of urban population, which is set to grow over the coming years.
Since the seminal work of Oates (1972) on scal federalism, a central question of public finance has been which level of a federation should be as- signed the provision of public goods. In this paper we study the problem of a government that is to choose the optimal centralization/decentralization mechanism for the final treatment of municipal solid waste. We analyze incentives, equilibria and implications of the governance framework for the disposal of waste. The key decisions revolve around the mobility of waste and the externalities (pollution) associated with its disposal, be it incineration or landfill. Moreover, if the Regions are characterized by different levels of efficiency in the processes they apply to the final treat- ment of waste, in theory a certain degree of waste mobility across regions should allow to reap the benefits of higher efficiency. On the other hand, as transportation and other environmental costs implied by mobility and concentration are significant, a trade-off emerges. Our model evaluates the implications of that trade-off for the optimal degree of decentralization in waste management.
SUMMARY Many countries are decentralizing in various ways. Decentralization is often intended at least partly to make government more efficient, flexible, and responsive. Many studies have evaluated the effects of decentralization on the provision of such services as health and education as well as on corruption, stability, and growth. Because what governments do and how well they do it is inseparably entangled with the question of how they are financed, this article outlines why and how a key element in a sound decentralization program should be to strengthen the linkage between local expenditures and local revenuesâcalled here the Wicksellian Connection. Copyright Š 2014 John Wiley & Sons, Ltd.
JosĂŠ M. Alonso, Judith Clifton, Daniel DĂazâFuentes
The Spanish Agency for the Evaluation of Public Policies (Agenda Estatal de EvaluatiĂłn de las PolĂticas PĂşblicas y la Calidad de los Servicios â AEVAL) was established in 2007. One of the original justifications for creating this agency was to improve public policy evaluation with the end result of improving governmentâs coordination of public policy implementation in the context of a decentralized Spain. From the 1980s, Spain had been transformed from a highly centralized system to a decentralized territory composed of 17 regional governments, or Autonomous Communities, henceforth, ACs. Improving coordination was not the only reason to establish AEVAL, but it is on this task that this chapter focuses. Other important objectives included: promoting a more rational use of public resources; improving public service quality; and bolstering accountability to citizens. However, in the period leading up to its final creation, the political complexities underlying the urge to improve coordination issues as a result of decentralization became apparent. Today, the AEVAL functions as an evaluator of public policy, but significant issues related to coordination practices between central and regional governments remain. This chapter presents and evaluates AEVAL as regards its creation, organization, functions and performance to date. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
The implications of delegating fiscal decision making power to sub-national governments has become an area of significant interest over the past two decades, in the expectation that these reforms will lead to better and more efficient provision of public goods and services. The move towards decentralization has, however, not been homogeneously implemented on the revenue and expenditure side: decentralization has materialized more substantially on the latter than on the former, creating vertical fiscal imbalances. These imbalances measure the extent to which sub-national governments' expenditures are financed through their own revenues. This mismatch between own revenues and expenditures may have negative consequences for public finances performance, for example by softening the budget constraint of sub-national governments. Using a large sample of countries covering a long time period from the IMF's Government Finance Statistics Yearbook, this paper is the first to examine the effects of vertical fiscal imbalances on fiscal performance through the accumulation of government debt. Our findings suggest that vertical fiscal imbalances are indeed relevant in explaining government debt accumulation, and call for a degree of caution when promoting fiscal decentralization.
Decentralization is the allocation of power between central and lower levels structures of the government. The dimensions and the extent to which powers are transferred from one level to another vary across countries depending on the goal a country wishes to achieve. But one of the common aspects included in the transfer of powers to the lower level structures is financial decentralization. The reason is clear. It makes no sense to transfer power to the lower level structures without finance to execute own decisions. Transfer of financial powers to lower level structures and creating an alignment that support efficient and effective operation of each structure, has often been one of the major challenges in the implementation of decentralization model of government. Tanzania has been one of the victims in this situation. In view of various government reports, since independent in 1961, the several attempt tried by the government to transfer powers to the lower level structures led to either little or no success. The adoption of Decentralization by Devolution (D by D) in 2000 could be considered as the government attempt to correct the existed bottlenecks that led to the failure in the previous initiatives to decentralise. This paper attempts to answer the question: âis financial decentralisation realised under the DbyD, and what are the factors that contribute or hamper the financial decentralisation? The paper is based on the research findings presented in Mbogela (2009). The report consisted of descriptive presentation on financial matters from four case councils namely: Mbozi District council, Mbeya City council, Mbeya District council and Morogoro Municipal council. The findings from the four cases are presented, examined and compared. Keywords: Decentralisation by devolution, financial management, Local government authorities.