FISCAL MANAGEMENT IN DANGILA MUNICIPALITY, ETHIOPIA. PERFORMANCE AND POLICY IMPLICATIONS

Fiscal decentralization is one component of decentralization that gives authority to local governments to collectrevenue through taxes and responsibility over spending decisions. Even though fiscal decentralization has givenrevenue raising and spending decision powers to lower levels of government, the implementation process hasoften been a daunting task for many local authorities in the developing world. In the case of Ethiopia,decentralization has been implemented since 1991. However, revenue raising and expenditure management arenot efficiently and effectively exercised, especially in lower level government units of Ethiopia. Insufficient revenuecollection and reprehensible expenditure management leads to financial incapability such that public infrastructureand services could not be financed amply. Dangila municipality faces the problem of financial capacity to deliverinfrastructure and services to its citizens. While a number of studies have documented the financial incapacities ofEthiopian municipalities, they have been very shy to articulate the discrepancies and deficiencies that linkfinancing to service delivery. It is interesting to know what the driving factors are in this case. Therefore, the mainfocus of this paper is to assess the efficiency and effectiveness of revenue collection and expendituremanagement of Dangila Municipality. To obtain edifying data the paper used a positivist survey study. Municipalityfinancial documentation and questionnaires were the main sources of secondary and primary data respectively.Parametric descriptive statistical methods were applied in the analysis of data to arrive at measures of efficiencyand effectiveness in revenue collection and expenditure management of the municipality. The study revealed thatthe municipality is not efficient and effective in its revenue collection and expenditure management. The mainexplanation for such inefficiency comprise; derisory assessment of taxable sources, poor organizational structure,inadequate accounting system, absence of clear operational guidelines, poor planning and data basemanagement, lack of awareness by taxpayers and lack of skilled manpower. To resolve such challenges, werecommend the following actionable measures; widening the revenue base of local sources of revenue, improvingplanning and implementing capacity, establishing adequate data base systems, continuous awareness creation fortaxpayers, establishing appropriate guidelines and methods of revenue collection, revision of the tariff structureregularly, installing accounting system that produces timely a