ANALYSIS OF GOVERNEMENT REVENUE COLLECTION AND

EXPENDITURE IN RELATION TO SERVICE DELIVERY:

A CASE OF TABORA DISTRICT COUNCIL

By

Josephat B. Nsana

A Dissertation Submitted in Partial Fulfillment of the Requirements for Award of the

Masters of Science in Accounting and Finance (MSC – A&F)

of Mzumbe University

2015
 CERTIFICATION

We, the undersigned, certify that we have read and hereby recommended for acceptance by
the Mzumbe University, a dissertation entitled Analysis of Revenue Collection and
Government Expenditure in Relation to Service Delivery: A Case of Tabora District
Council, in partial fulfillment of the requirements for award of Master of Science in
Accounting and Finance at Mzumbe University.

_____________________________

Major Supervisor

______________________________

Internal Examiner

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External Examiner

Accepted for the board of……………………………………

________________________________________

DEAN/DIRECTOR, CHAIRPERSON,
FACULTY/DIRECTORATE/SCHOOL/BOARD

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 DECLARATION
AND
COPYRIGHT

I, Josephat B. Nsana, declare that this thesis is my own original work and that it has not
been presented and will not be presented to any other university for a similar or any other
degree award.

Signature_____________________________

Date __________________________________

This dissertation is a copyright material protected under the Berne convection, the
copyright Act 1999 and other international and national enactments, in that behalf, on
intellectual property. It may not be produced by any means in full or part, except for short
extracts in fair dealings, for research or private study, critical scholarly review or discourse
with an acknowledgment, without the written permission of Mzumbe University, on behalf
of the author.

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 ACKNOWLEDGMENT

It is not unusual for someone to be proud and blissful for making a certain success. This is
very realistic on my side. The period takes this study makes me to realize this joy has come
to an end. However, the accomplishment of this thesis is a result of collective efforts of
many people whom my joy will have no meaning if I fail to accord my heartfelt
appreciation for their support.

Glory is to Almighty God for giving me a chance and enabling me to perform this work.

I also convey special gratitude to my supervisor Mr.Aloyce Maziku for his outstanding
guidance, advice, assistance, encouragement and constructive criticism throughout the
study, may God bless you.

The heartfelt thanks go also to my family members especially my father and my mother for
their prayers, moral support and encouragement not to give up from this opportunity, May
God bless you all abundantly.

I would also like to thank leadership and all members of Tabora District Council for
permitting and assisting me to carry out my study in areas under their jurisdiction
comfortably. Thanks also go to all the respondents who accepted my request of
interviewing them. Their cordial cooperation rendered to me during data collection is
highly appreciated, may God bless you all.

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 ABBREVIATIONS AND ACRONYMS

ALAT Association of Local Government in Tanzania

CAG Controller and Auditor General

CHF Community Health Fund

DDC District Development Cooperation

DED District Executive Director

DSE Dar es Salaam Stock Exchange

DT District Treasurer

ITA Institute of Tax Administration

LGA Local Government Authority

MOFEA Ministry of Finance and Economic Affairs

NAO Tanzania National Audit Authority

PEDP Primary Education and Development plan

PMO-RALG Prime Minister Office-Regional Administration and Local

Government

SICTAS Simplified Computerized Tax Administration System

TANESCO Tanzania Electricity Supply company

TATEPA Tanzania Tea Parkers Ltd

TBL Tanzania Breweries Ltd

TDC Tabora District Council

TRA Tanzania Revenue Authority

VAT Value Added Tax

VEO Village Executive Officer

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 ABSTRACT

The study examined the relationship between government revenue collection and
expenditure in relation to service delivery in Local Governments Authorities (LGAs) with
the case of Tabora District Council (TDC). The study employed quantitative and
qualitative approaches. Random sampling technique was used to select 26 respondents
comprised by Councilors, Ward Executive Officers (WEOs), Village Executive Officers
(VEOs) and Final beneficiaries. Purposive sampling was used to select 22 district officers.
In total the study involved 48 respondents.

Data were collected from both primary and secondary sources by use of structured
questionnaires with mainly closed ended questions. The findings revealed that public
expenditure utilized by TDC was not assuring quality service provisions to the people due
to misappropriation of public funds. It was also observed that the capacity of TDC to
generate its own source revenue was very low; Central Government grants/transfer was
shown as the major funding source, this implied that the LGA loses its autonomy and acted
as a signaling that the TDC cannot stand by its own.

The implementation of development projects in TDC was restrained by a number of

factors, but most distinguished, poor public expenditure management, weak capacity of
revenue collections, political interference and failure to involve lower level citizens within
their localities in budgeting process. The study recommended various measures to be taken
by the Central Government and TDC. Central Government should transfer grants to LGAs
basing on the priorities of the citizens, in particular TDC through ALAT should emphasis
on the importance of the national budget resources to be shared equally between central
government and local governments so that local governments do not have to depend on
conditional grants.

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 TABLE OF CONTENTS

CERTIFICATION ................................................................................................................ i

DECLARATION AND COPYRIGHT ............................................................................... ii

ACKNOWLEDGMENT .....................................................................................................iii

ABBREVIATIONS AND ACRONYMS ........................................................................... iv

ABSTRACT .......................................................................................................................... v

TABLE OF CONTENTS .................................................................................................... vi

LIST OF TABLES ................................................................................................................ x

LIST OF FIGURES ............................................................................................................. xi

LIST OF APPENDIX .......................................................................................................... xi

CHAPTER ONE ................................................................................................................... 1

INTRODUCTION AND PROBLEM SETTING .............................................................. 1

1.1 Background Information .................................................................................................. 1

1.2 Statement of the Problem ................................................................................................. 4

1.3 Objectives of the study ..................................................................................................... 6

1.3.1 General objective 6

1.3.2 Specific objectives 6

1.4 Research Questions .......................................................................................................... 6

1.5 Scope of the Study ............................................................................................................ 7

1.6 Justification of the study................................................................................................... 7

1.8 Organization of the Dissertation ....................................................................................... 8

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CHAPTER TWO ................................................................................................................ 10

LITERATURE REVIEW .................................................................................................. 10

2.0 Introduction .................................................................................................................... 10

2.1 Theoretical Literature ..................................................................................................... 10

2.2 Sources of revenue in local government authority ......................................................... 11

2.3 Revenue collection performance in local government authority .................................... 13

2.3.1 Tabora District Council Revenue Administration System 15

2.3.2 Revenue from government grants and donor funds 16

2.3.3 Expenditure Performance in local government authority 17

2.3.4 Principle of Maximum Social Advantage by Hugh Dalton 20

2.3.5 The relationship between public expenditure and service delivery in Local
Government Authorities 21

2.3.6 The relationship between revenue collection and service delivery in local
governments 22

2.3.7 Challenges facing government revenue collections and service provision in local
governments 25

2.4 Empirical Literature........................................................................................................ 28

CHAPTER THREE............................................................................................................ 33

RESEARCH METHODOLOGY ...................................................................................... 33

3.0 Introduction .................................................................................................................... 33

3.1 Study Design .................................................................................................................. 33

3.2 Study Area ...................................................................................................................... 34

3.3 Study population and sample size .................................................................................. 34

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3.4 Data Collection Instruments ........................................................................................... 35

3.5 Primary data collections Instruments ............................................................................. 36

3.5.1 Personal Interviews 36

3.5.2 Personal Observation 37

3.5.3 Questionnaire 38

3.6 Secondary Data ............................................................................................................... 39

3.6.1 Documentary review 39

3.7 Data Analysis Technique ................................................................................................ 40

3.8 Validity and Reliability .................................................................................................. 41

CHAPTER FOUR .............................................................................................................. 42

PRESENTATION OF RESULTS AND DISCUSSION .................................................. 42

4.1 Introduction .................................................................................................................... 42

4.2 Characteristics of Respondents....................................................................................... 42

4.2.1 Respondents by gender 43

4.2.2 Respondents by length of service 43

4.2.3 Respondents by function 44

4.2.4 Education level of respondents 45

4.3 Overall identification of Sources of revenue collection ................................................. 47

4.4 Performance of revenue collection at Tabora District Council between years 2010-201451

4.5 Expenditure performance at Tabora District Council between years 2010-2014 .......... 55

4.6: Relationship between government expenditure performances in relation to service

delivery ................................................................................................................................. 68

4.7 Challenges facing revenue collection in relation to service delivery ............................. 72

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4.8 Real situation at TDC with regard to revenue collection ............................................... 75

CHAPTER FIVE ................................................................................................................ 78

SUMMARY, CONCLUSION AND RECOMMEDATIONS ......................................... 78

5.1 Summary of the findings ................................................................................................ 78

5.1.1 The sources of revenue in Tabora District Council 78

5.1.2 Assessment of revenue collection performance 79

5.1.3 Assessment of expenditure performance 80

5.1.4 Challenges facing government revenue collections and service provision 80

5.1.5 The relationship between government expenditure in relation to service delivery 82

5.2 Conclusion ...................................................................................................................... 83

5.3 Policy Implications ......................................................................................................... 84

5.4 Recommendations .......................................................................................................... 85

5.4.1 Public Expenditure structure 85

5.4.2 Advocacy for Change Budget Architecture 86

5.4.3 Investment Potentials 86

5.4.4 Enhancing own source revenue collection capacity 88

5.4.5 Streaming revenue administration 91

5.4.6 Outsourcing revenue collections 91

5.4.7 Computerization of revenue management 91

5.4 Limitations of the Study ................................................................................................. 92

REFERENCES ................................................................................................................... 94

APPENDICES..................................................................................................................... 99

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 LIST OF TABLES

Table 2.1 The assignment of expenditure responsibilities in LGAs in Tanzania ........... 18

Table 3:1 List of respondents ......................................................................................... 35

Table 4.1 Sources of revenues and their contribution to total revenues ......................... 47

Table 4.2 Revenue collection performance of TDC between 2009/2014 ...................... 52

Table 4:3 Expenditure performances for TDC between 2009/2014 .............................. 56

Table 4.4 Capital expenditure in relation to service delivery ......................................... 59

Table 4.5 Level of satisfaction of health service offered by TDC ................................. 61

Table 4.6 Health Services (CCHP Report) ..................................................................... 61

Table 4:7. Consultation, Treatment and Medicine Charges treated by dispensaries and
health centre in TDC ...................................................................................................... 62

Table 4:8. Level of water supply services offered by TDC ........................................... 63

Table 4.10 Primary education (official data) .................................................................. 65

Table 4.11 Capital expenditure and its impact to services delivery ............................... 68

Table 4.12 Estimation results: Ordinary Least Squares ................................................. 69

Table 4:13. Challenges in revenue collection................................................................. 74

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 LIST OF FIGURES

Figure 2.1: Conceptual framework ................................................................................. 32

Figure 4:1 Respondents by gender ................................................................................. 43

Figure 4:2 Respondents by length of services ................................................................ 44

Figure 4:3 Participants function representation .............................................................. 45

Figure 4:4 Education levels of respondents.................................................................... 46

Figure 4:5 Sources of revenues and their contributions to total revenues ...................... 48

Figure 4:6 Revenue raising trend of TDC between 2009/2014 ...................................... 52

Figure 4:7 Expenditure raising trend of TDC between 2009/2014 ................................ 58

Figure 4.8: Capital expenditure in service delivery........................................................ 60

Figure 4.9: Relationship between expenditure and service delivery .............................. 70

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 LIST OF APPENDIX

Appendix .1 Survey Study Questionnaire ...................................................................... 99

Appendix. II A: Summary of tdc revenue collection on category basis ...................... 101

Appendix. II B: Summary of tdc expenditure on development activities .................... 102

Appendix. II C. Summary of tdc expenditure on recurrent activities ......................... 103

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 CHAPTER ONE

INTRODUCTION AND PROBLEM SETTING

1.1 Background Information

Local Government Authorities (LGAs) service delivery system in Tanzania has

exceptional potentiality like many other developing and developed countries. It
affects the day to day activities of people at the grassroots level. Tanzania has been
functioning with LGAs service delivery system for over decades, but it was yet to
become the basis for a viable system of decentralized governance. Before the
responsibility of service provision to the grassroots level, it was held on central
government. In the year 1972 the central government proved failure and reform took
place, it was in the year 1982 where the LGAs were re- introduced to operate under
decentralization Prime Minister, (1996).

The District that was re-established in 1982 was considered, at that time a milestone
in the process of LGAs service delivery system in Tanzania. It was visualized as the
tactic for decentralization for development and improving service delivery to the
community. The main task of the council incorporated the approval of an annual
development plan and its implementation.

In its performance experience, the LGAs fell far short of becoming an effective
vehicle for development or for administration to become a tier of government. It
proved inadequate to accommodate different challenges for service delivery;
ultimately the councils were rendered ineffective in addressing the need of the
people. Furthermore it failed as an experiment in participatory democracy
Prandeed, (2010).

Inadequate service provision for many LGAs in Tanzania has been revealed in
different mechanisms established to assess the implementation of public funds in
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LGAs. Public expenditure tracking survey (PETS), citizens‟ report cards and the
Audit reports of the Controller and Auditor General (TNAO), were used to oversee
the implementation status of projects.

In the audit report the number of qualified, adverse and disclaimer opinions in
regard to their financial statements and development implemented projects had
been increasing from 42% in the year 2009 to 51.5% in the year 2010 and
unqualified opinions had been decreasing from 58% in the year 2009 to 48.5% in
the year 2010 (TNAO 2010).

These opinions indicated inefficiency and low level of expenditure management of

local government funds in Tanzania, the reasons contributed to the increase in
qualified opinion to many LGAs have been raised as poor performance and
inadequate capacity of LGAs to implement and monitor expenditure on
development projects. The major area that contributed to poor performance was non
adherence to approved budget implementations; the approved budget for projects
had been implemented to accommodate other unnecessary non budgeted recurrent
expenditures as a result the intended beneficiaries were not enjoying the benefits
intended.

Price Waterhouse Coopers Tanzania (PWC) in 2007 conducted audit to map out
development funds issued for education expenditure, the findings revealed that 57%
of the funds were diverted PWC, (2007). The report indicated that once the funds
are deposited in the district accounts, the issue of priority or intended activities is
forgotten. Other reports highlighted misuse of public funds through corruption,
embezzlement, political interference and weak internal control system as a major
problem TNAO, (2011). Low capacity in revenue collections, weak administrative
capacity to assess taxes and levies and then to enforce revenue laws and by-laws
was among identified weaknesses.

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Furthermore high dependency on central government transfers makes the district a
mere mediator of central government rather than fully autonomous local
government.

Central government attempted several measures in order to improve the capacity of

LGAs to provide quality service to the community, these measures were;
requirement to enhance transparency and to increase accountability for funds
transferred from central government to the districts that shall be publicized in the
media, it is mandatory for every LGA to post or transfer projects fund release
information to council notes board, district offices notes board and public places
where community gathering takes place.

Training of different established monitoring committees like school and health on

how to use information to hold the authorities accountable for development funds
received was among measures taken by central government to improve capacity of
LGAs. Moreover the government put in place various expenditure tracking and
reporting systems and of these, Internal audit units has been set up in most LGAs to
perform regular audit of public expenditure and the intention was to detect
anomalies (if any), to curb malfeasance in public expenditure and thus ensure
corruption free and results to service delivered improved.

TDC through other government organ like Prevention and Combating of Corruption
Bureau had convicted different officials for misuse of public funds (TDC/ 1, 30 /
VOL 1). It is in the same vein TDC enhanced capacity of revenue collections by
reviewing their sources and increase tax base of revenue collections through Finance
meeting held on 24thJuly 2007, Min 03/TDC/Own source/2007, that the district
would address the issue to improve on revenue collection.

3
Despite of all measures taken, in most cases service receivers were socially
excluded or paid minimal attention in getting basic goods and services from LGAs.
In view of the facts, the present study focused on the analysis of the Government
revenue collection and expenditure in relation to service delivery with the case of
Tabora District Council (TDC).

1.2 Statement of the Problem

Public expenditure structure is a very important intergral area which determines

economic development. Goverment should ensure that capital expenditure and
recurrent expenditure are properly managed in a manner that it will raise the
national productivity capacity and accelerate economic growth; hence service
delivery improved (Usuman and Nurudeen 2010). Capital expenditure on
infrastructure encourages economic growth and high expenditure on recurrent
expenditure slowdown economic performance (Niloy, Emranul and Osborn 2003).

Fiscal policy and fiscal management requires a good understanding on how the
expenditure side of the budget is planned, prepared and executed (Zhou, 2012). The
LGAs, Local finance Act No 9 of 1982 needs public expenditure management that
should entails appropriate planning and spending within the budget processes,
streghthening, eveluating and monitoring the expenditure control systems is very
important for attaining public service devery. On the other side the same act
stipulates the need for the Local Authorities to raise enough revenue to finance
local development. Financial stability of the Councils can only be attained if there is
sustainable improvement on effective and stable revenue sources (Act of
Parliament, 1982)

Despite the fact that Local Goverment Act require public to pay attention on
appropriate spending withing the budget level, it is obvious to find funds disbursed
4
for development activities are re allocated to other uses that were not budgeted or
less budgeted, example purchasing administrative vehicles and short life equiptment
and stocks (TNAO, 2010).

Despite of recommendations issued by TNAO to implement activities as per budget

guidelines, misuse of public funds became normal, as it was shown on audit report
of different projects like school and dispensary buildings, these were below
goverment standards constructed or poor quality, the situation which indicated that
value for money was not attained.

Moreover, feasibility study for construction of shallow well in the districts in year
2008 consumed a total of Tshs 250 million funds from rural water supply and
sanitation, but audit report of year 2010 revealed no water was available from those
shalow well constructed, this is the indication that public funds go to the few
advantageous officials (TNAO, 2010).

In general the level of service delivery in Tabora District Council is below the
expectation of end users due to poor availability of clean water and sanitation,
accessibility and affordability of clinics and dispensaries charges, increase in
dumping site, and there are no reliable and passable roads throughout the year
(TNAO, 2010).

The above situations give good reason to conclude that achievements in public
services provisions resulting from inefficiency expenditure management and
monitoring are far behind satisfaction level of the citizens. It was upon such a state
of affairs the researcher wanted to find out how public expenditure affects service
delivery in Tabora District Council.
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1.3 Objectives of the study

1.3.1 General objective

An overall objective of this study was to analyze the revenue collection and
expenditure in relation to service delivery at Tabora District Council.

1.3.2 Specific objectives

i. To identify the source of Tabora District Council revenue

ii. To asses revenue performance at Tabora District Council

iii. To asses expenditure performance at Tabora District Council

iv. To identify the challenges facing government revenue collections and

service provision at Tabora District Council

v. To identify the relationship between government expenditure and service

delivery at TDC

1.4 Research Questions

In order to attain the above objectives, the study is guided by the following research
questions.

i. What are the sources of revenue for Tabora District Council

ii. What is revenue performance at Tabora District Council

iii. What is expenditure performance at Tabora District Council

iv. What are the challenges facing government revenue collections and service
provision at Tabora District Council

v. How does government expenditure relate to government performance in

terms of service delivery at Tabora District Council

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1.5 Scope of the Study

The study was conducted in Tabora District Council to analyze the revenue
collection and expenditure in relation to service delivery. Specifically, the study
examined the sources of TDC revenue, assessed revenue performance at TDC,
assess expenditure performance at TDC, identifying the challenges facing
government revenue collections and service provision at TDC and identifying the
relationship between government expenditure and service delivery at TDC between
years 2010 to 2014.

1.6 Justification of the study

Local Government Authorities‟ formation intended to bring decision making and

service provision closer to the citizens. Misuse of public funds and failure to
establish efficient expenditure structure and low capacity of revenue collections has
been a financial alarming problem reported to people served by TDC, and other
external supervisors like TNAO. The findings of this study will help to recommend
measures that can be taken by TDC management and other LGAs facing the similar
challenges to alleviate or reduce the challenges facing smoother provision of
services.

1.7 Significance of the study

This study is useful and valuable to various stakeholders such as prospect

researchers, students, consultants, Councilors/government and donors in the
following aspects: The findings will help to identify challenges facing government
revenue collections and service provision in local goverments. The findings and
recommendations of the study will be useful to councilors and supporting staffs of
Tabora District Council who are major stakeholders in suggesting measures to
alleviate the problems facing expenditure performance and service delivery in the

7
council by eliminating or reducing challenges to the current operating system and
therefore achieve their full potentials. It will be significant to local government
administrators as they will be able to recognize the strong correlation between
public expenditure and service delivery in LGAs. It will act as a reference point for
other local government authorities in Tanzania that encounter the same challenges
in public expenditure structure, revenue collection and unsatisfactory service
delivery. The study will enable local government administrators to manage and
monitor expenditure properly to deliver quality and accessible public services to the
community. They would ensure that the utilized expenditure effectively and
efficiently used to deliver services to the people. The findings of this study will be
significant to other researchers, as it will pave a way for further study on
expenditure and other variables such as corruption, effect of motivation on service
delivery and the role of quality supervision on service delivery. Finally it is
requirement as a partial fulfillment of Master of Science in Accounting and Finance
degree( Msc .A&F)

1.8 Organization of the Dissertation

The study has been organized in five chapters. Chapter One entails the purpose of
the researcher to decide to undertake this particular research and not another.
Chapter one provides preliminary information about the nature of the research and
what will exactly be done. Chapter Two reveals literature sources which the
researcher passed through when developing his idea about the research. Other
people‟s ideas were incorporated with the aim understanding well the research
topic. The purpose was to know how other researchers, readers, organizations and
governments say about the problem in question. Chapter Three is the methodology
part. This section explains the way the research has been conducted. The methods
and techniques adopted. Chapter Four presents and discusses the findings.
Instruments like, charts, per cent, tables and figures were used to present
similarities and differences of the research findings.
8
Similarities, differences and magnitude of the results are discussed. Chapter Five is
the summary, conclusion, recommendation and limitations of the study and areas
for further research. The researcher makes summary of what has been done,
observed and presented, implications of the findings and recommendations to
policy makers. The last part presents the bibliography and the appendices.

9
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This section will review the literature on the analysis of government revenue
collections and expenditure in relation to service delivery. This chapter is divided
into two parts, one focus on theoretical literature and the other reviewing empirical
literature.

2.1 Theoretical Literature

In 1982, Tanzania reassumed the decentralization policy after being abolished in

favour of a centralized system of government to deliver services to the local levels
in 1972, the system which failed to flourish (Mmari, 2005). Decentralization policy
wanted to establish a system of governance underpinned by strong local
governments‟ management. Subsequent constitutional and legal reforms established
districts and the sub-counties as key pillars of local governments through which
effective service delivery and local governance is to be attained.

Although decentralization has been pursued over the last years, there is widespread
harmony that the performance of local governments is less than desirable. The
revenue base of local governments has diminished and they are now heavily
dependent on central government disbursements mainly through conditional grants.
The quality of services is less than desirable as key services such as health care,
water and sanitation, education, road network, electricity supply and agricultural
advisory services remain dismal. In order to improve service delivery, a sound
revenue system for local governments is an essential pre-condition for the
achievement of fiscal decentralization; this is because in addition to raising revenue,

10
it has the potential to promote political and administrative accountability by
empowering the communities.

The literature reviewed in this study is mainly about studies carried out in
developing countries including Tanzania in relation to expenditure applicability to
TDC local government.

2.2 Sources of revenue in local government authority

The major sources of revenue for the LGAs are transfers from the Central
government; this is provided in section 10 (1) and (2) of the Local Government
Finance Act no 9 of 1982 (Act of Parliament, 1982). About 90 percent of the funds
for the recurrent and development expenditure of LGA are transfers from the
Central Government, and 5 percent from donations and development aid from
bilateral donors and charitable foundations, while the remaining part is funded from
LGAs own sources (Nkupama, 2005).

Grants are provided to local governments for several reasons. Act of Parliament
(1982) indicated the following as the main objectives of extending grants to local
authorities: To ensure that all LGAs are able to provide minimum social services,
correcting vertical imbalances, inducing LGAs to expand services to particular
areas which are seen as beneficial by the central governments or to persuade merit
goods. Facilitating the development of LGAs which are lagging behind for one
reason or another in order to reduce regional inequality, overcoming insufficient
local revenue capacities (to correct an insufficient local finance system) either in
general or underdeveloped or poor regions and ensuring a minimum level of
redistribution of the system of taxation as a whole by raising more revenue via

11
progressive central government taxes as opposed to the generally more proportional
regional or local taxes.

According to Carnegie and Baxter (2006) the local revenue generated constitute 75
percent of the revenue used in the provision of services delivered to the local
communities in the developed countries. In developing countries the issue is
different, since almost all rural councils‟ capacity to collect their revenue still lay on
5 percent at the same time they are responsible for almost 20 percent in their
expenditure.

Prior to the rationalization, most district councils generated only 10-20 percent of
their total revenues from own sources, of which development levy was the main
source, 80 to 90 percent of total revenues in many LGAs were conditional grants
transferred from the central government (Fjeldstad, 2003). Hence, fiscal autonomy
in many local authorities was limited both with respect to revenues and
expenditures.

Fjeldstad (2003) continued to highlight that one major administrative problem today
for many councils is their inability to collect fully the revenues due to them. In most
council there are huge gaps between reported and projected revenues. He concludes
that this is due to: Poor administrative capacity to assess the revenue base, poor
administrative capacity to enforce the taxes, explicit and international tax evasion
and resistance from tax payers, corruption, including embezzlement of revenues,
external pressure on the local finance department to provide optimistic revenue
projections; and political pressure on the local tax administration to relax on
revenue collections. In this setting, fundamental issues to be addressed in the
context of local government fiscal reforms are to redesign the current structure and

12
to strengthen financial management. Moreover, measures are required to enhance
taxpayers‟ compliances and to improve the accountability of tax collectors and
councilors.

In other hand unconditional grant is the minimum that shall be paid to the local
governments to run decentralized services and shall be calculated in the manner
specified in the seventh schedule of the constitution (Act of parliament, 1982).
Closely related conditional grant consist of moneys given to local government to
finance programs agreed upon between the government and local authority, the
local governments shall spend those money for the purpose for which it was made
and in accordance to the condition agreed upon, which in most cases is not released
on time.

Equalization grant is the fund to be paid to local governments for giving subsidies
or making special provision for the least developed district and shall be based on
the degree to which local governments unit is lagging behind. Whereas
unconditional grants could be used to enhance service delivery by local
governments, conditional grants has conditionality that affect service delivery
because what appears the central government priorities may not necessarily be the
same priority for the local government. Conditionality affects the autonomy of local
governments in making their own decisions concerning service delivery (Oboth,
2001).

2.3 Revenue collection performance in local government authority

Local revenue performance is the percentage of budgeted collections and actual

collections. Local governments are supposed to use their own-source revenues to
finance local services (Fjeldstad, 2004). Local authorities are able to derive revenue

13
from property tax and service tax. The adverse effects of taxation on private
investment and consumption are more significant with regard to personal income
tax than graduated tax. By impacting on private investment and consumption,
taxation becomes an important tool of fiscal policy.

In most African countries, own source revenues compose a very small percentage
of total sub national revenue and their share has either not improved much or has
actually declined. This means that LGAs have not reduced their dependence on
central government transfers. This was made worse by the removal of graduated tax
which was the major source of revenue of the local government hence affecting the
quality of service delivery.

The taxing powers of the local government are not extensive enough and the
existing sources are far inadequate to meet their expenditure. The revenue from
central government in form of grants is beyond the estimates. This has been good
but more than 50 percent of the unconditional grants are trapped. Therefore, very
little is left for enhancing service delivery (Oboth, 2001).

In order to understand the degree of the flows of revenue collections in LGAs; A

researcher gives a vivid scenario experienced through participatory study in the
field. According to revenue collectors from the finance department of the TDC,
these sources of revenue are hard to administer and suffer from high compliance
costs. Enforcement is weak, tax resistance widespread, accountability is low and
corruption is common especially at check points. It has observed that the council
has no designated staff responsible for revenue collection. Each department forming
TDC, if it has revenue sources within its area of operation, staff of that department
are responsible to effect collection of revenue. Those who are involved in revenue
collection are provided with receipt books. At this point they determine how much

14
should be paid, at the same time they collect it, and handle it to office of chief
cashier where Open General Receipt (HW5) is issued. This experience was shared
with staff responsible for land management in the council to collect revenue from
forest produce. However, sometimes they direct tax payers to pay their due tax at
the council‟s cash office. This is a weakness in revenue collection which needs to
be addressed by the council immediately.

Own generated revenues in LGAs, TDC inclusive, are basically used to finance
operational costs, in particular salaries for the lower level of local government
employees and sitting allowances for councilors. The huge amount with respect to
investments and capital development in LGAs is financed through central
government transfers. TDC almost depends entirely on these transfers and funding
from Development partners like Elizabeth Glaser Pediatric Aids Foundation who
contributed much on prevention of mother to child transmission diseases and care
and treatment to people living with HIV and Rural water supply and sanitation
programme who facilitate distribution of water supply infrastructures in the council.

2.3.1 Tabora District Council Revenue Administration System

Responsibility of revenue collection lies on the Council‟s hemisphere and is

completely separated from the central government. Revenue collection is organized
and carried out by the council but monitoring is organized around three levels, the
responsibility rest with the office of WEO. Besides monitoring revenue sources, the
WEOs also handle development issues and law-and-order functions at that level.
For this purpose the local armed force is at their disposal. At the village level, the
responsibility to monitor revenue sources is on the office of the village executive
officer. VEO is also responsible for supervising village development activities and
maintaining law and order. The stated responsibilities justify inefficiency of

15
revenue collections, since these people are responsible for other activities apart
from revenue collections.

2.3.2 Revenue from government grants and donor funds

Article 193(1) of the constitution and section 84 of the local government act 1997;
provide that central government shall transfer money to local government through
unconditional, conditional and equalization grants. Unconditional grants are the
minimum grant paid to local governments to run local government activities.
Conditional grants are the minimum grant paid to local governments to finance
programmes agreed upon between the central government and local governments.
And they are only spent on purposes for which they are meant and in accordance
with the conditions agreed on.

Equalization grant is the money paid to Local Governments as special subsidies,

and is paid based on the degree which a local government is lagging behind the
national average standards set by the central government. Therefore, through the
conditional, unconditional and equalization grants, central government can
influence local government policies and programmes. As estimates for the sector
grants are to be calculated and communicated by Ministry of Finance, Planning and
economic development, Local governments do not need to invest a lot of time in the
calculation of transfers from the central government.

Thus, the sector ceilings communicated by ministry of finance, planning and

economic development in the local governments as a lead towards preparation of
Medium Term Expenditure Framework.

16
2.3.3 Expenditure Performance in local government authority

According to Prime Minister Office- Regional Administration and Local

Government (PMO-LARG) and Ministry of Finance and Economic Affairs
(MOFEA) 2006, the government‟s assignment of expenditure responsibilities
between different government levels is guided by the policy of “decentralization by
devolution”, which is spelled out in the Policy Paper on Local Government Reform
(MRALG, 1998). According to this policy, expenditure functions should be
assigned to the local government level in accordance with the “subsidiary
principle”. This principle states that government services should be delivered by the
lowest government level that can do so efficiently. The lowest level of the
government is said to be near the local residents, this also simplify the devolution.
The functions and expenditure responsibilities of local government authorities in
Tanzania are assigned in the Local Government (District and Urban Authorities)
Acts; Section 111 and 118 of the Local Government (District Authorities). The Act
contains a list of functional responsibilities and public services to be provided by
district authorities. The current expenditure assignments contained in the Local
Government Acts are generally consistent with the concept of subsidiary.

However, since the public sector is never static, the Government should regularly
review its portfolio of central public expenditure responsibilities and consider
whether any of these public services could be delivered more efficiently and
effectively at the local government level (PMORALG, 2006). Table 2.1 displays
expenditure responsibilities in LGAs.

17
Table 2.1 The assignment of expenditure responsibilities in LGAs in Tanzania

Type of local government function Local government activity

Concurrent functions: locally provided “national” - Primary education

public services
- Local health services
- Agriculture extension and livestock
development
- Water supply
- Local rods and works.
Exclusive local government functions - Street cleaning
- Local parks
- Local markets
- etc
Local government administration - Council operations
- Local planning
- Local financial management
- Village and Mtaa administration
- etc
Delegated central government functions - Outbreaks of infectious diseases

Source: PMO-RALG (2006)

The most prominent category of local government responsibilities in Tanzania are

concurrent functions: (national) public services for which the provision is devolved
to the local government level. These services include the five grant-supported
sectors (primary education; local health services; agriculture extension and
livestock; water supply; and local roads as seen in Table 2.1. For these activities,
the central government continues to bear responsibility for setting policies,
regulations and norms, as well as for the financing.

18
As discussed further below, the local delivery of concurrent sector activities should
be fully funded by sectoral block grants. The second category of local government
activities in Tanzania‟s framework for local government finance includes
“exclusive” or “purely” local government services, such as refuse collection, street
sweeping, and other such services. Since the benefits from these local public
services come about only the local community, the entire responsibility for these
activities (including policy direction, financing, provision and production) should
be assigned to the local government level. These activities should be predominantly
funded from own resources.

However, to the extent that the local government revenue system provides
inadequate resources and in order to assure horizontal fiscal balance- part of these
local government activities should be funded from the unconditional Grant. This
grant form compensation of rationalized revenue sources.

Furthermore, LGAs are an integral part of Tanzania‟s national system of public

administration, and the predominant responsibility of local government authorities
is to provide concurrent public services. In this context, it would be appropriate to
fund local administration largely or wholly from central government resources. As
discussed below, local government should receive resources for local administration
through the General Purpose Grant. While the central government should set
regulatory standards for local government administration such as reporting
requirements, it should refrain from interfering with managerial or administrative
decisions of individual LGAs.

Moreover, there may be a number of central government activities which

(statutorily or otherwise) may be delegated to the local government level. These
activities should be fully funded by earmarked ministerial subventions to the local

19
level. These ministerial subventions should be clearly identified in the central
government budget. The prevention of contagious illnesses may be considered such
a delegated responsibility.

Finally, local capital development activities –whether for concurrent, exclusive, or

administrative purposes, should be funded by a combination of own source
revenues, local borrowing, and capital development grants. To the extent that these
capital development activities fall within the concurrent sectors, the central
government may impose policy guidance, regulations and norms. Whenever
appropriate, again, local capital development responsibilities should be devolved to
the village/Mtaa level.

2.3.4 Principle of Maximum Social Advantage by Hugh Dalton

The government should incur its expenditure in a manner as to promote the greatest
good of the greatest number. There should be maximum increase in production as a
consequence of public expenditure. The government should follow the law of
equal-marginal utilities in the same manner as an individual does to attain
maximum satisfaction out of its expenditure (Kundra and Somashekar, 2005).

Most of the operations of public finance involve transfers of purchasing power from
some persons to others. Revenue through taxation causes transfers from certain
individuals to public authorities, and there are transfers back from these authorities
to other individuals by the way of public expenditure. As the result, changes take
place in volume and pattern of the production of wealth and its distribution (Kumar
and Mittal, 2002). What is important to consider is whether these changes are
socially advantageous. If they are, the operations are justified, otherwise not. In the
public authorities, changes may be seen if at all can implement fully. Therefore the

20
best system of public finance is that which secures the maximum social advantage
from the operations which it conducts.

2.3.5 The relationship between public expenditure and service delivery in

Local Government Authorities

Many studies illustrate that government expenditure is positively related with

economic growth and service delivery, but due to high expenditure most of the
developing countries are facing the problem of fiscal deficit. Fiscal deficit leads to
inflation in the economy and decrease the employment and output which adversely
affect the level of service provision in the country.

Service delivery to customers is a crucial component of the overall performance of

the local authorities and scholars have provided a detailed and objective assessment
of their measurement (Zikri and Katiman, 2010).

The objective assessments of their measurement are explained in the following

dimensions; Education; the focus is in the sitting and writing space, infrastructure in
schools, availability of trained teachers, and the level of absenteeism, corruption
and accessibility.

Health: examining the number of health centers, accessibility pre and post-natal
services, health facilities, amount of drugs, commitment of health workers, and
doctor to patient ratio. Water and sanitation: looking at different sources of water,
safe water coverage, quality of water, waste management and level of sensitization
of the public. Re-enforcing the ideals put forward by Gronroos (1993) on service
management, services have a direct and immediate effect on the quality of lives of
the people in the community. For example, if the water that is provided is of a poor

21
quality or waste is not collected regularly, it will contribute to the creation of
unhealthy and unsafe living environment (Thandeka, 2010).

An overall objective of the local government reform program is to restructure local

government authority so that they can respond more effectively and efficiently to
identify local priorities of service delivery in a manner that is sustainable, improved
quality, access and equitable particularly to the poor (Einar, Amon and Helge
2005). Ability of any civil service reform program to meet its goals is difficult to
ascertain because of the lack of baseline description of pre- reform service knowing
the baseline will help the country set realistic goals for improving service delivery
to the public.

2.3.6 The relationship between revenue collection and service delivery in local
governments

Most scholars have the opinion that idea of tax administration is to raise sufficient
revenue for social and local development, the relationship between expenditure
performance and service delivery is questionable as propounded in a management
letter of annual audit report from the CAG, which state that there is a complete need
to ensure that local governments strengthens their tax base and tax administrations,
mobilize as much revenue as possible and there by become less dependent on
central government transfers , this is alarming problem since every year this
comment exist. According to Collier (2009) local revenues are important for the
success and long term sustainability of infrastructure and service delivery in local
governments.

However, the importance of local revenue cannot be emphasized particularly in the

case of Tanzania local authorities where it is obvious local revenues used for
constituency allowances to the councilors, co funding to development projects
22
where by it is only funded when lower levels people initiate projects and it is only
5% of total value of the projects is funded.

Building administrative headquarter blocks and much more funds go to

administrative expenses as it is shown on the audit reports (TNAO, 2010),
furthermore this source has declined due to the suspension of the graduated tax and
failure to identify other sources of local revenue by administrative staff. As a
general basis for local government operation, the public services provided are
typically funded by local funds (Garry and Claude, 2006). Linking tax payment to
service delivery was a recommendation of the revenue enhancement study in 2000.
The perceived inefficiency and ineffectiveness of the administration of revenue
sources and poor service delivery continue to hamper the healthy and orderly
development of local authorities (David, Martin and Maziah, 2006).

Drawing from reference of CAG Audit report, tax evasion is attributed to a norm
centralization process. That is tax evasion justify their cheating by the belief that
everyone also does the same thigh and or that the benefit they receive from
government fall below their share of tax burden. The fiscal autonomy of rural
councils is limited both in terms of revenue and expenditure. The abolition and
rationalization of many local revenue sources has increased rural and urban
councils‟ dependence on central government grants (Fjeldstad, 2006).

Fiscal decentralization and managing public funds requires specific expertise.

Dealing with for example private capital markets or development funds, need sound
knowledge of finances and budgeting and the development of staffs with
appropriate expertise and qualification (Amis, 2009). It is believed that adequate
participation by citizens in the planning; budgeting and monitoring processes

23
encourage them to comply by paying local taxes to fund development projects in
their localities.

According to Fjeldstad (2004), 73% of the respondents in Tanzania were willing to

pay more taxes if public services were improved. But the responses may come in
negative answer when the situation shows poor service delivery, people engage in
non-tax payment. However, the majority of the respondents said they would be
willing to pay more taxes if public services were improved. Hence, from a capacity
point of view it is a major challenge to provide better linkages between tax
payments and service delivery.

Levitt (1991) state that it matters little whether the products are highly priced or low
priced whether they are technically complex or simple, whether the buyers are
supremely sophisticated in technology of what is being considered or just plain
ignorance or whether they buy for themselves or their employers. Everybody
depends to some extent on both appearance and external impressions. However, the
quality and quantity of services is of a very significance factor (Chowdhury and
Amarnnath, 2005).

Local governments are capable of providing public services, mobilizing community

resources, stimulating private investment, expanding urban linkages, adopting
national developments to local conditions and investing in local infrastructure.
They can also be a crucial source of empowerment by offering opportunities for
long neglected citizens to participate in the local decision making process. They
also act as a voice for local needs at higher levels and providing adopted support for
local people initiatives.

24
The growth of Africa‟s towns and cities has outpaced local authority capacity for
service delivery in terms of management, infrastructure, and financing (McCluskey,
2003). Many Local governments are unable to deliver services to residents. This
might be because of lack of finance knowledge or lack of capacity to provide good
services at affordable price. By providing a more direct link between citizens‟
contributions and service delivery, such mechanisms have in some cases proved to
be an effective and sustainable means of mobilizing the resources needed to
improve basic services for the people (Fjeldstad, 2004).

The relationship between level of revenue collections and service delivery can be
clearly portrayed by various rules and regulations governing the local governments
which include not exclusive to the Local Government Act of 1997. The Local
Government Finance Act of 1982 and accountability regulations (1998), the
framework paper and annual plans all geared towards the provision of quality
accessible and equitable services to the public as it‟s the primary responsibility of
each government to take care of its citizens (Act Of Parliament, 1982).

2.3.7 Challenges facing government revenue collections and service provision

in local governments

In order to have improved control of revenue collection, the Government of

Tanzania instigated and implemented a number of local government reforms.
These reforms, to great extent, aimed at increasing the resources available to local
government sanctions and improving the administration of those resources
(Chikongoye and Muyoga, 2011).

But of even greater importance is the need to improve on the collection of revenue
from the existing sources of local government authorities. Relatively a bit of effort

25
has been directed at imparting improved procedures for collection of revenue from
council‟s own sources to council‟ staff. Despite certain positive developments on
the part of the Central Government, LGAs in the country still face a number of
setbacks.

One such major administrative challenge is the inability to collect fully the revenue
due to them. The huge gaps between reported and projected revenues in TDC
revenue data is an indication of inability to collect and this is due to: weak
administrative capacity to assess taxes and levies and then to enforce revenue laws
and by laws, taxpayers resistance and low tax morale on the part of citizenry,
corruption, including embezzlement of revenue by revenue collectors, external
pressure on the local finance department to provide optimistic projections and
political pressure on the revenue collectors to relax on revenue collection.

In specific terms revenue flow for TDC is limited by the following factors: tobacco
cess is collected at a rate of 5 percent of the indicative prices instead of market
price, some individuals avoid selling their tobacco cess at the auction through the
warehouse receipt system contrary to the requirements of the law, non-cash
remittance for the export levy, usually TDC receive farm inputs equivalent to the
export levy collected by the central government. This is contrary to the requirement
in the tobacco cess registration. TDC is mandated to manage natural resources like
forest and products from forests. In the process TDC spends more to ensure that 5
percent from the Central Government in respect of earnings accruing to the
Ministry responsible for natural resources from resources use in Tabora District.
TDC has very few revenue sources but the collection is not supported by legal
instruments. For example there is no by law for collection of service levy, produce
cess, forest produce cess. The only applicable and legal instrument used to collect

26
revenue is the produce cess by law of 1985. TDC depends mostly on transfer from
the central Government.

Both central government and LGAs are generally expected to provide public
service, but is common to find that the own source revenue raising powers of the
latter are not sufficient to meet the costs of providing the services they have been
assigned. The resulting gap can be filled by vertical equalization ie, transfer
resources from the central government or by increasing revenue raising powers of
LGAs. But increasing local own-source revenue is, more often than not, quite
challenging. For example, allowing LGAs to have substantial revenue raising
powers reduce central control over the total size of the public sector and raises
concerns about macroeconomic stabilization. In addition, appropriate local revenue
bases are commonly weak or too administratively complex for LGAs to handle.

Given these realities, transfer mechanisms are often the most suitable way to
achieve vertical equalization. Horizontal equalization is also important because
there are generally wide differences in the ability of LGAs to mobilize resources
independently. If only local government own-source revenues were available to
finance assigned local services, there would be substantial inter- jurisdictional
differences in the quantity and quality of public services based largely on
differences in resources endowments. Intergovernmental transfer can be a powerful
mechanism to help equalize these differences in LGAs fiscal capacity.

27
2.4 Empirical Literature

Several empirical studies across the world have explored the relationship between
government revenue collection and economic growth using cross sectional and time
series data for both developed and developing countries as follows, Sakib (2011)
states that empirical studies focus on government revenue collections on government
consumption growth relationship is diverse. Most of the empirical studies focus on
government‟s consumption expenditure. For example, Ram (1986) concluded that
public expenditure expansion had significant effect on national income growth;
contrary, Barth (1990) and Landau (1986) found that public expenditure expansion
had negative effect on national income growth for both developed and less
developed countries. In a most recent study conducted by Sakthivel and Inder (2007)
for India found bidirectional causality between national income and public
expenditure and economic services.

Henrekson (2001) studied the relationship between government expenditure and

economic growth for a sample of wealthy countries for 1970-95 periods, using
various econometric approaches. The authors submitted that more meaningful
(robust) results are generated, as econometric problems are addressed. In India,
Sharma (2008) examined the effect of government development expenditure on
economic growth during the period 1950-2007. The authors discovered a significant
positive impact of government expenditure on economic growth. They also reported
the existence of co integration among the variables. Al-Yousif (2000) indicated that
government spending has a positive relationship with economic growth in Saudi
Arabia.

On his part, Ram (1986) studied the linkage between government expenditure and
economic growth for a group of 115 countries during the period 1950-1980. The

28
author used both cross section, time series data in his analysis, and confirmed a
positive influence of government expenditure on economic growth.

Zahid and Zafar (1998) investigated relationship between macroeconomic variables

and economic growth in Pakistan. They have concluded that budget deficit is
negatively correlated with the economic growth and output as it considered as a sign
of macroeconomic instability. Siddiqi, Iqbal and Jumshaid‟s (2010) study shows that
public expenditure expansion has significant effect on national income growth. They
further concluded that fiscal deficit reduces the output through taxes and current
expenditure (civil servant salaries etc) that negatively affect economic sector‟s
productivity and it also crowd out the economic sector investment as weak credit
market performance.

In other hand Public expenditure structure has a big role on determining a level of
service provision. Akujuobi et al. (2012) highlight that the structure of public
expenditure will determine the pattern and form of economic growth and service
provision in the state.

The Government of Tanzania is committed in providing high quality and responsive

services to all Tanzanians in the country. This is a challenge not only to the national
level but to Local Government Authorities as well. Attaining the assured goal will
require fundamental changes in the way that the national and local government
authorities organize and conduct their activities by assuming the proper public
expenditure structure in the sense that, more funds are allocated to capital activities
and fix budget deficit by proper budgeting and inflation adjustments to avoid
ruining real purchasing power. According to findings from different researchers

29
there is a need for further studies to obtain clear understanding of the effect of
revenue collections and expenditure in relation to service delivery to the public.

Luzige (2008) examined the relationship between Local Revenue Collection and
Service Delivery in Local Governments with special reference to Mpigi district in
Uganda. A conceptual framework was developed relating various sources of
revenue (Graduated tax, Rent and Rates, License and Permits and other
miscellaneous revenues) to Service Delivery (expenditures on health, education and
sports, technical services and roads, community and welfare).

The specific objectives that guided the study were: to examine the Local Revenue
collection outturn in Mpigi; to find out the effectiveness of Service Delivery in
terms of expenditure for Mpigi District and to establish the relationship between
Local Revenue collection and Service Delivery in Mpigi District. A longitudinal
and quantitative research design was used to collect data from eleven Local
Governments out of a population of eighteen Local Governments in Mpigi District.
Proportionate Stratified Sampling, Random Sampling and Purposive Sampling
techniques were used to select both Higher and Lower Local Governments. Local
Revenue outturn and Service Delivery expenditure were analyzed and presented
using descriptive statistics while the relationship was examined using correlation
analysis and regression model to predict Service Delivery.

The main findings show that increase in Local Revenue collection leads to
increased Service Delivery and there exists a significant relationship between Local
Revenue performance and Service Delivery. From the findings it is evident that
Local Governments need to constantly enhance local revenue performance, which
is likely to result into increased Service Delivery, a major Local Government

30
performance indicator. This performance indicator is similar indicator used by
Tanzanian government in assessing the performance of its local governments. Thus,
the current study provide gap to study the same in Tabora District council which is
Tanzanian local government.

Fjeldstad (2007), argued that, before the rationalization of local government taxes
in Tanzania, most district council generated only 10-20 percent of their total
revenue from own sources, of which development was the major source. 80-90
percent of total revenue in many rural types of council authorities was conditional
grants transferred from central government. Hence, fiscal autonomy in most local
authorities was limited both with respect to revenues and expenditures. However,
the rationalization had reduced the limited local autonomy even further.

The study revealed the immediate consequences of the rationalization; some council
activities were scaled down or postponed. This provided 27 rooms for further
revenue reforms in LGA so as to increase their autonomy. This undoubtedly room
for further study on why LGA have to raise enough revenues and how their budget
implementations are affected especially district authorities.

31
Figure 2.1: Conceptual framework

Control variable Independent variable Dependent

variable

Revenue Collection Expenditure Government Performance

Own Source Development Good Service Delivery

Expenditure
Government Grant

Donor Fund

Own Source
Recurrent Poor Service Delivery
Government Grant Expenditure
Donor Fund

Source: Own Design

The conceptual framework above shows that public expenditure framework has a
big role on determining the level of service provision in the council, high
percentage expenditure on recurrent activities result to poor service delivery and
expenditure on development activities lead to good service delivery. Moreover,
the study will establish the relationship between capital expenditure and service
delivery to see whether there is a significant relationship between the two, if yes
then increase in capital expenditure will increase service delivery.

32
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter discusses the methodological framework that was used to conduct the
study on analysis of government revenue collections and expenditure in relation to
service delivery at Tabora District Council. It discusses the research design and data
collection instruments that were used in the study; it shows the area where the study
was carried and sampling techniques. The chapter also depicts the relative strengths
and weaknesses of the methods and instruments chosen by the researcher.
Furthermore, the chapter covers the data analysis procedures that were used after
the collection of data and the summary.

3.1 Study Design

The researcher decided to conduct a case study because TDC is a public

government institution and thus an in depth studies on the analysis of government
revenue collection and expenditure in relation to service delivery was done. The
study used both quantitative and qualitative methodological approaches.
Quantitative approaches helped to collect data and study the relationship of one set
of facts to another and used techniques that are likely to produce quantified and
generalizable conclusions. The qualitative approach enabled the researcher to
understand individuals‟ perceptions on themes under review by seeking their
insights rather than statistical perceptions of the theme (Bell, 2005).

33
3.2 Study Area

The study was conducted in Tabora District Council TDC is a local government
which was established under the Local Government Act, 1985. The council
jurisdiction covers the area of over 11806 square kilometers comprising 29 wards
and 156 registered villages. The District is situated between latitude 5.4 o-6.15o south
and 32.15o-34.15o east. The land is largely savannah with miombo woodland
covering 65.7 percent of the District. There are scattered hill of loamy soil and the
largest area is suitable for cultivation covered by clay loam, sand clay or clay texture
at some depth in the subsoil above 100 cm depth and reddish in colour.

3.3 Study population and sample size

Population of this study included a total of 48 employees of TDC, including 12

officers from the management, 8 Councilors, 10 low level employees of Tabora
District Council, 4 ward executive officers (WEOs) and 4 village executive officers
(VEOs), and 10 tax payers (Final beneficiaries). All the above mentioned
individuals have an influence on the analysis of government revenue collections
and expenditure in relation to service delivery in Tabora District Council. The
respondents selected should be as representative of the total population as possible
in order to produce a miniature cross section. Thus this research was based on the
Tabora District Council which constitutes larger number of staffs and final
beneficiaries.

The criteria used to come up with the names of those who participated in the study
were: capability of the group to provide valuable information on the analysis of
government revenue collection and expenditure in relation to service delivery, the
ability of the researcher to have access to the selected group of council‟s
management team, councilors, low level employees and final beneficiaries, which

34
was achieved by informing them before they approve to participate in the study.
With these two factors, the following lists of people were supplied with
questionnaires

Table 3:1 List of respondents

Respondent Expected Actual Percentage

Respondent(s) Respondent(s) Response rate

Finance Department 8 8 100%

District Planning Department 2 2 100%

Distinct Development Office 2 2 100%

Ward Executive Officer 4 2 50%

Village Executive Officer 4 2 50%

Low level employee 10 8 80%

Councilors 8 6 75%

Final beneficiaries 10 5 50%

Total 48 35 72.9%

Source: Researcher, 2015

3.4 Data Collection Instruments

In this study, both primary and secondary sources of data were used. According to
Krishnaswami (2003), there are two sources of data, namely, primary data source
and secondary data source. The data serve as the bases or raw material for analysis.
Without an analysis of accurate data, no specific inferences can be drawn on the
question under study.

35
3.5 Primary data collections Instruments

Primary data is information gathered directly from respondents which involves

creating new data collected from existing sources (Kombo and Tromp, 2006).
Primary data were collected through Questioners, personal interview and personal
observations. Each of these data collection instruments is clarified below.

3.5.1 Personal Interviews

Personal interview method requires interviewer asking questions generally in a

face-to-face contact to the other person or persons, and the method of collecting
information through personal interviews is usually carried out in a structured way
calling the interviews structured interviews which involve the use of a set of
predetermined questions, and of highly standardized techniques of recording
(Kothari, 2004).

Apart from the questionnaire, interview was used to collect data for this study. The
study adopted the use of structure interviews, restructured interview allows
respondents to talk about what is of their central significance to them and give their
views; it also helps the interviewer to avoid losing structured questions thus, ensure
all topics that are important for the study are covered (Bell, 2005).

The researcher carried out a direct conversation with District Executive Director
(DED) of TDC and answers were recorded in researchers‟ notebook. Also the
researcher interviewed administrative staffs, Councilors and Final beneficiaries of
TDC. The interviews contained questions needed to fill the gaps that could not be
filled by the questionnaires. Appointments for interviews with respective officers
were not made in advance, but rather depend on the availability of ample time

36
interviewees could get within their tight schedules at work. Notes were taken during
interview and recorded in a notebook.

3.5.2 Personal Observation

Observation system is a procedure by which an observer records what is occurring

in some situation or setting. “Observation can be categorized mainly into participant
and non-participant observation. In participant observation, the researcher is
directly involved in the collection of data through observation, while in the non-
participant observation, the researcher does not directly participate in the data
collection” (Aina, 2002).

The main advantage of this instrument is that subjective bias is eliminated, if

observation is done accurately, and the information obtained rerates to what is
currently happening (Kothari, 2004). According to Bell (2010), observation can be
useful in discovering whether people do what they say they do, or behave in the
way they claim to behave. Not only that, but also this method is independent of the
subject‟s willingness to participate and highlights behaviors and actions that people
may not think to report because they seem unimportant (Aina, 2002).

However, observation as a technique has various disadvantages that include limited

information and the method itself being expensive. Also it is not always possible to
anticipate an impulsive event and thus be prepared to observe it, the duration of an
event affects the feasibility of observing it, and it is generally more difficult to
quantify observational data than other forms of data (Aina, 2002). This research
used the participatory observation technique in observing the revenue collections as
they were handled at chief cashier‟s office and process of payments at expenditure
department at TDC. The researcher got an opportunity to inspect files related to

37
revenue collections and expenditure in finance registry, health data, water supply
data and education data in their respective departmental registry; this was non
participatory obtrusive observation. The technique helped the researcher to record
observations as they appeared and also to discover whether responses from
respondents in the interviews related to the actual situation.

3.5.3 Questionnaire

The questionnaire was the main data collection instrument used in this study. Three
sets of questionnaires with both open and closed questions were developed and
administered. The first set of questionnaire was administered to administrative
staffs that are responsible for policy making and decision making as action officers
from different department at TDC. The questionnaire for this group focused on
issue of policy for revenue collections and how expenditure structure was observed,
also it focused on how revenue collection is advantageous to the public.

The second set was administered to councilors who are the co-owner of the council,
this set was administered to see whether the councilors are appreciating or not on
the issue of revenue collections trends and expenditure on service delivery. And the
third set was for final beneficiaries (tax payers), this group was very important
because they are in a position to weigh out on their position regarding tax they pay
and outcome of it in terms of service delivery.

The questionnaire was chosen due to its flexibility in data collection as it generates
data that is simple to code for analysis particularly when closed ended questions are
used. As observed by Moore (1987), a questionnaire lends itself the best for
collecting information on different dimness of opinions, which were in line with
this study. Moreover, open ended questions allow respondents to make an
independent analysis of a problem over and above the multiple choices provided by
38
the researcher. However, the researcher was aware of the possible shortcomings of
this method which included invalid and zero responses as well as loss of
questionnaires by some of the respondents.

However, such shortcomings were addressed in advance by piloting the

questionnaire before distribution. For the purpose of introducing the study and
seeking permission to administer questionnaires as well as assuring respondents for
confidentiality, a letter written by the researcher was attached to the questionnaires
introducing the study. The confidentiality of respondents was assured as it was
clearly stated in the introductory part of each questionnaire that “all responses
supplied will be used only for academic research purposes”. Further, respondents
filled the questionnaires voluntarily and were not supposed to write down their
names. The questionnaires were physically distributed by the researcher to
respondents concerned and each respondent was allowed two weeks to complete the
questionnaire and agreements on the day and time of collecting it were made.

3.6 Secondary Data

Secondary data are information neither collected directly by the user nor
specifically for the user which entails data that already has been collected by
someone else (Kombo and Tromp, 2006). Secondary data was collected through
documentary review.

3.6.1 Documentary review

The researcher also examined the documents of TDC as way of collecting data. In
this method, the Controllers and auditors annual audit report for five consecutive
periods under study were inspected, Annual financial reports and various published
non published material of TDC were reviewed. The researcher used this method in
order to get in-depth information on analysis of revenue collection and expenditure

39
in relation to service delivery. It was also used to enhance the validity and value of
the study by filling in the gaps that could have been left by other data collection
instruments. However, weaknesses such as authenticity of the examined
documents, and judgment of the value of document contents were handled carefully
by the researcher in order to ensure the right information for the study was
obtained.

3.7 Data Analysis Technique

In this study both quantitative and qualitative data was collected and then analyzed.
For quantitative data the Statistical Package for Social Science (SPSS) and STATA
was used for data coding. The SPSS then enabled the researcher to generate charts,
graphs and tables indicating frequencies of study responses from categories of the
respondents. STATA used to establish relationship between public expenditure and
service delivery.

On the other hand, qualitative data from open ended items in the questionnaire,
interviews, and personal observations was analyzed using thematic analysis. This
form of analysis categorizes related theme or topics and major concepts are
identified. In this form of analysis the researcher viewed the collected data and
identified information that is relevant to the research questions and objectives and
developed a summary report identifying major themes and the association between
them. The frequency with which an idea or word appeared much was then used to
interpret the importance, attention or emphasis (Kombo and Tromp, 2006).

40
3.8 Validity and Reliability

Validity and reliability of the collected data should be checked in order that the
findings depict the reality and the desired outcome (Sounders et al., 2007). The
validity and reliability has been highly considered in this research through the use
of different methods of data collections like questionnaires, Interview, participant
observation as a primary data and documentary review like the report of Controller
and Auditor General annual audit report of TDC, annual financial reports depicting
revenue and expenditure as a secondary data has been used. The combination of
these methods enables any research to be meticulous, broad and precise.

During the study, the researcher has made reasonable efforts to ensure validity by
ensuring that data were collected in a valid way, reliable and accurate. For instance,
Pretest as an opportunity to identify questionnaire items that tend to be
misunderstood by the participants or do not obtain the needed information has been
conducted through review by administrative staff and other people having capacity
and idea of formulating questionnaires.

Emphasis has also put on pilot study. According to Aina (2002), state that; if
possible the pilot study should be done to a group similar to the one that will form
the population of your study. This study used the pilot study before formulation of
the population group of my study. According to Bell (2005) state that all gathering
instruments should be piloted to test how long it takes to complete them, to check
that all questions and instructions are clear and to enable one remove any item
which does not yield usable data.

41
 CHAPTER FOUR

PRESENTATION OF RESULTS AND DISCUSSION

4.1 Introduction

In the perspective of this chapter, the data collected are analyzed, presented and
discussed. The data collected based on research questions and intends at attaining
research objective. They are presented and analyzed using both qualitative and
quantitative methods of data analysis. Moreover, descriptive statistical method to
analyze the relationship between variables was employed in presenting and
analyzing the data.

Data collected through questionnaires were used to observe the relationship

between public expenditure and service delivery in TDC. Secondary data were used
to analyze the effect of poor management of expenditure in service delivery and
assessing whether there has been any improvement in the level of service provision
to the people.

4.2 Characteristics of Respondents

Basic demographical information, gender, level of education and length of service

were among data collected under the topic of personal information during the
questionnaire survey. The rationale behind this was to show the distribution of the
respondents and helps the reader to understand how relevant information is
collected from the sample in presenting the target population.

42
4.2.1 Respondents by gender

Out of 35 participants, the majority responses comprised 20 male (57%) and 15

female (43%) as depicted in the graphical presentation of the data (see Figure 4.1),
the fact that there were more male in the sample than female, this indicates that
there are more male staff in TDC and this is obvious due to its remote geographical
location, female are not willing to work at that environment. Figure 4.1 illustrate by
showing percentage of responses.

Figure 4:1 Respondents by gender

Source: Survey data, 2015

4.2.2 Respondents by length of service

Figure 4.2 shows the distribution of respondents by length of services at TDC. It

was represented that 12 (34%) of respondents were, possessing minimal experience
working less than 5 years, whereas 23 (66%) represents respondents having

43
experience of more than five years at TDC. This implies that those who have been
in the field for more than 5 years were more willing to give information as
compared to those with 3-5 years, Figure 4.2 portrays by showing percentage of
responses.

Figure 4:2 Respondents by length of services

Source: Survey data, 2015

4.2.3 Respondents by function

It was shown that a significant number of participants were from councilors, ward
executive officers, village executive officers and final beneficiaries who accounted
for 74.3%. The departments of revenue and expenditure accounted for (8.6%) each;
treasurer accounted for 5.7% and assistant accountants constituted 2.9%. This
meant that the percentage held by councilors, ward executive officers, village
executive offices and final beneficiaries was high compared to Treasurer, Assistant
Accountants, Revenue and Expenditure departments. The respondents generally
reacted positively while giving information. These responses are shown on Figure
4.3
44
Figure 4:3 Participants function representation

Source: Survey data, 2015

4.2.4 Education level of respondents

Out of 35 respondents, 34.3% of the respondents were Primary level, the same
percentage possessed by respondents who were not categorized their level of
education, 25.7% were University level and 5.7% of them were High school level.
This depicts that the number of degree holder at TDC is low compared to primary
level, but the number of degree holder is reasonably enough since they are the
decision makers; these are head of departments and their subordinates. Graphically
presentation of this findings are shown on Figure 4.4 below

45
Figure 4:4 Education levels of respondents

Source: Survey data, 2015

As examined earlier, the rationale behind the characteristics of the respondents was
to validate that the relevant information was collected a sample that is
representative. From the above analysis, it is clear that majority about 65.7% of
respondents have been working on TDC for more than five years and about 34.3%
were working for about less than five years, this indicates that the data has been
received from well experienced officials, hence it was expected that the
information provided by them was highly valuable for this study. The participants
representation by function also revealed that final beneficiries/ tax payers,
councilors, ward and village executive officers togather represents 74.6% of the
population, who are highly dependant on service provision issued by TDC. In
general, the proportion of the particiapants by gender, length of work and
education level confirmed a highly diversified sample was selected.

46
4.3 Overall identification of Sources of revenue collection

The basic revenue sources of LGAs are defined in sect 10 (a) sub sect (2) of Local
government finance act of 1982, the main source of revenue is intergovernmental
transfers, LGAs depends heavily to fund its operation from central government
grant. Other sources of revenue includes own sources, donor funds and borrowing.

Both own source revenue collections and local government borrowing play a much
more limited role in the total financial inflows for LGAs. This study indicated that,
heavily dependency on grant from central government reduced autonomy of LGAs
to meet the need of its people. It is hard to tailor conditional grant as were fixed
and were not permissible. Table 4.1 indicates the sources of revenue and their
respective contribution to total revenue in the last five consecutive years.

Table 4.1 Sources of revenues and their contribution to total revenues

Sources of revenue Amount of Revenue 2009 - 2014 Percent

Own Source Revenue 4,474,165,906.53 6

Government Grant 65,992,531,074.53 86

Donor Funds 6,350,201,283.19 8

Total 76,816,898,264.16 100

Source: Audited Financial Statements from (2010 -2014)

As depicted in table 4.1 above and figure 4.5 below, financial data (secondary data
review) stipulate that government grant contribute 86 percent to total revenue
collected under the period of study, and 8 percent come from donor fund, own

47
source revenue contribute insignificant amount to the total revenue. This shows that
the revenue from this source is not properly planned and collected. To put it more
clearly, due to inefficient assessment and coverage, revenue sources have not been
properly considered. Figure 4.5 below clearly show contribution of each source to
total revenue.

Figure 4:5 Sources of revenues and their contributions to total revenues

Source: Survey data, 2015

Fiscal autonomy of local government is more effective when LGAs can raise a
relatively large share of its revenues locally. If the transfer from central
government as a major source of financing local operations is not matched by
ability to finance the daily operations of the council, there is a risk of creating
friction between the two organs. In fact, local government will remain overly
dependent on central government to finance them. Since the central government
48
sets rules and generally takes high yielding taxes for its own use, LGAs tend not to
have access to tax revenue and sources that would effectively free them from grant
transfers.

Local governments face many challenges in their way of revenue collections, but
most of the challenges are caused by central government as it was shown on
literature review, for instance revenue collected from forest sources are subject to
sharing between central government and LGAs, but it is only 5% of collections go
to local government regardless high costs incurred for collecting those revenues.

Financial data obtained from the field shows that tobacco cess is collected at a rate
of 5 percent of indicative prices instead of market price, some individual avoid
selling their tobacco cess at the auction through the warehouse receipt system
contrary to the requirement of the law.

Poor administrative capacity to assess the revenue base, poor administrative

capacity to enforce the taxes, explicit and international tax evasion and resistance
from tax payers, corruption, including embezzlement of revenues, external pressure
on the local finance department to provide optimistic projections; and political
pressure on the local tax administration to relax on revenue collection was the main
challenges to the district.

Furthermore the highest percent of 12.5 explained that TDC is highly dependent
on the central government and donor funds for its budget support.

The district locally generated revenue amounts to an average of 5 to 6%, the rest
94 percent is from central government. This level of dependency undermines the
rationale of decentralization, affect service delivery and overall performance of the
district.

49
Most grants from central government are conditional and therefore earmarked for
specific services; only a slight degree of flexibility is permissible, but even so with
restrictions.

The unconditional grant, which is the only grant that LGAs may use as part of their
revenues, is mainly used to pay staff salaries. In many instance these funds are not
adequate, and hence create a funding gap. The findings from other researcher can
be taken as a proof that these challenges may affect revenue collection and hence
poor service delivery. Luzige (2006) in his research found that many of LGAs use
their revenues principally for administrative purposes, and LGAs should link
between tax paid and service delivery, he continued to say “unless tax payers
perceive a linkage between local revenue collection and service delivery they will
not be willing to pay tax” as a result reduce the level of public expenditure and
unsatisfactory service provisions.

Zondani (2008) in his research report found that non-payment of rates and service
charges has impact on the delivery of services by the municipality. The discussion
above shows that the challenges have negative effect in the revenue collection and
influence poor service delivery in the council. Objective roman ii has been
answered here. Intergovernmental transfer is very important, but it should be
carried in such a way they are not used to prevent local government from
independent status. In snapshot without having adequate revenue source under the
control of LGAs, a relevant degree of autonomy cannot be attained.

To be precise, local sources of revenue should come from local sources due to the
following reasons; first, local revenues are important to enable LGAs to diverge the
quantity and quality of its services in respect of local citizens‟ preferences. Second,
if local government relies on grants there is a danger that local politicians can spend
the money inefficiently, third, very important there is greater accountability for
money raised locally because they are taxes from citizens in which they expect
50
returns in terms of better services than grants transfer from central government.
Finally, grants from central government often come with pre conditions attached
and usually not permissible. From this perspective the question needed to identify
sources of revenue in TDC has been explained and identified well.

4.4 Performance of revenue collection at Tabora District Council between

years 2010-2014

Local Authority Finance Act No. 9 of 1982 stipulates the need for the Local
Authorities to raise enough revenue to finance local development. Financial
stability of the Councils can only be attained if there is sustainable improvement on
effective and stable revenue sources, strong and efficient local governance with
own sources strongly being emphasized. At the same time sect 10 (a) sub sect (2) of
Local government finance act of 1982, state that there shall be paid annually to a
district council by way of block grants from the public revenue of the United
Republic as being costs to be incurred by the district council in the provision of
essential social service; particularly education, health, water, and agriculture (Act of
parliament, 1982).

The revenue of Councils could be improved depending on overall operation of

revenue collection; it also could be raised by improving the system or method of
collection and expanding tax base. In this study the researcher, through
documentary review examined the revenue collection under years of consideration
by comparing with the budget. The finding of the study reveals that there were good
trends of revenue collection in all the years under consideration. Both budgets and
actual collection of revenue show the rising trends. The actual revenue growth and
growth pattern is shown in Table 4.2 and Figure 4.6 below.

51
Table 4.2 Revenue collection performance of TDC between 2009/2014

Year Budgeted Revenue Actual Revenue Collected % of collection

2009/2010 10,046,604,537 6,897,796,159 68.66

2010/2011 10,854,639,528.78 9,924,654,790.87 91.43

2011/2012 13,404,424,329.76 13,482,021,223.33 100.58

2012/2013 18,953,391,053.52 14,267,371,008.30 75.28

2013/2014 17,956,822,809.90 14,908,051,209.78 83.02

Source: TDC Audited Financial Statements from (2010 - 2014)

Figure 4:6 Revenue raising trend of TDC between 2010 / 2014

Source: Survey data, 2015

52
Table 4.2 and Figure 4.6 above reveal that the council had good performance in
revenue collection, for instance in the fiscal financial year 2009/2010, TDC
accounted a total of Tshs 6.8 billion and from there the trend kept on increasing
until the financial year 2011/2014. In 2011/2012 it recorded the highest
performance of 0.58 percent above the budget estimate. The reasons contributed to
good performance included early and timely disbursement of funds from central
government, the funds which recorded the highest portion of recurrent expenditure
(salary) and donor funds to TDC; the other factor that contributed to increase in
revenue collection was outsourcing of revenue collections, this involved hiring
agents who were capable in tax administration with low cost while increasing
revenue collections. The weather was a factor contributing to the increase in
revenue collections. Good and favorable weather conditions had contributed to rise
of revenue sources that depend mostly on weather conditions like tobacco produce
cess and taxes from cereals products. In the year 2012/2013 there was decline of
25.3 % in the revenue collection, this shows that the budget and revenue collection
system of TDC was not designed in a way that encourages sustainable way of
collecting its own revenue. According to the data obtained from questionnaire
revealed that the main reason for decline was inadequate revenue collection system
for own source revenue, embezzlement of revenue collected in fact revenue
collected goes to individual pocket of fraudulent officials, and grants from central
government released below the approved budget.

To summarize, there is a need to reform the revenue collection system of the

council. This could be achieved through taking measures like revising sources of
revenue collections, to increase tax base and outsourcing revenue collections. The
study advice the management to put more effort on own revenue collection as it is a
reliable source of revenue, since grants from central government is conditional and
not reliable.

53
Revenue collection exertion can be achieved by improving the system of revenue
collection. Among the important methods, a vigilant study of local sources of
revenue and measuring each source of revenue is very important. According to the
data obtained from secondary sources, TDC lacks an organized system of revenue
collection. Performance standard are not well established and administered. In
addition, actual revenue collected does not been compared with planned and when
any deviation between actual collection from planned persist, corrective measures
were not taken over and over again. Enforcement procedures were not implemented
in a way that enhances the revenue collection process.

To be precise, tax evaders are not strictly enforced to pay their tax as per the law.
This is mainly due to lack of clear guidelines and inadequate managerial system.
Moreover, lack of professional manpower in relation to planning and management
is another problem for the council. Even though the council prepares its annual
plan every year, it however does not properly consider all the possible available
sources of revenue. For instance, as questionnaire and financial data revealed that
there was variation between planned and actual revenue throughout the period
under review, but in 2011/2012 the records reported high variation of revenue
collected from planned and continued on that way throughout the rest of years
under study.

The main reason for variation was due to inadequate revenue collection system for
own source revenue, embezzlement of revenue collected in fact goes to individual
pocket of fraudulent officials, and grants from central government released below
the approved budget. In fact there is possibility that service provision to citizens is
undermined and few people enjoy the syrupy of poor.

54
The findings shows that TDC do not utilise effeciently its revenue sources, and the
performance has been eratic, this implies that the revenue collected has negative
impact on service delivery, this finding is not far from the one concluded by Luzige
(2008) who examined the relationship between Local Revenue Collection and
Service Delivery in Local Governments, he concluded that increase in Local
Revenue collection leads to increased Service Delivery and there exists a significant
relationship between Local Revenue performance and Service Delivery. From this
discussion, the question on assesment of revenue collection performance has been
attained.

In concluding there is a need to reform the revenue collection system of the council.
This could be achieved through taking measures like revising sources of revenue
collections, to increase tax base and outsourcing revenue collections. The study
advice the management to put more effort on own revenue collection as it was a
reliable source of revenue, since grants from central government is conditional and
not reliable.

4.5 Expenditure performance at Tabora District Council between years 2010-

2014

An objective of the Local Government Reform Program as explained in the

background of the study is to restructure Local Government Authorities so that
they can respond more effectively and efficiently to identify local priorities of
service delivery in a sustainable manner.

This includes more specific objectives, like to increase civil society participation in
service provision and improve quality access and equitable delivery of public
services, particularly to the poor. However, the research found that it is not possible
for local government authorities to be determined as the main determinant for

55
eventual improvements in service delivery performance. Government grant and
donor fund in combination are important to be considered.

In providing infrastructure and services to the citizens, councils expend their

financial resources in the form of recurrent and capital expenditure. The recurrent
expenditure (sometimes called the routine expenditure), is concerned with regular
operation and administrative expenses like salaries of personnel, purchase of short
life equipment and stock, and the costs of routine repair and maintenance. Capital
expenditure is normally concerned with the creation of long term assets such as
construction of roads, school and other infrastructural facilities. Table 4.3 depicts
the recurrent, capital and total expenditure of Tabora District Council.

Table 4:3 Expenditure performances for TDC between 2010 / 2014

Percentage of Percentage of
Recurrent Capital Total Recurrent Capital
Year Expenditure Expenditure Expenditure expenditure expenditure

2010 6,239.44 1,915.47 8,154.91 76.51 23.49

2011 9,521.53 2,511.55 12,033.08 79.13 20.87

2012 7,263.23 2,603.20 9,866.43 73.62 26.38

2013 7,961.88 3,385.15 11,347.03 70.17 29.83

2014 9,881.11 3,432.15 13,313.26 74.22 25.78

Total 40,867.18 13,847.53 54,714.71 74.69 25.31

Source: Audited financial statement from (2010-2014)

56
Table 4.3 above indicates that council expenditure amounted to 40,867.18 Tsh.
billion and 13,847.53 billion from recurrent and capital expenditure respectively in
the last five years. The data in the table also shows recurrent expenditure has been
given greater emphasis than that of capital expenditure. The percentage of recurrent
expenditure has ranged between 70.17% and 79.13 % for the period under study.
The percentage of capital expenditure has ranged between 20.87% and 29.83% for
the period of five years (2010-2014).

In general the proportion of recurrent expenditure is 74.69% to total expenditure

and capital expenditure account for only 25.31% for the last five years of study.
When the Pattern of expenditure is observed, data shows that recurrent expenditure
has an increasing trend for the years under review and it only decreased in 2012 and
2013, but the decreasing rate was minimal and the funds used was high.

On other hand, capital expenditure has been fluctuating drastically for the period
under review. The main reasons for the above inconsistent and inefficiency
utilization on capital expenditure are poor planning, poor expenditure control and
weak internal control to safeguard financial assets of the council. This is bad
indicator; the objective of quality service provision to citizens cannot be attained if
strong measure to improve planning and budgeting, effective control of public
expenditure like PETS and strong internal control system are not installed properly.

In order to see the performance of government expenditure, the researcher

compared actual utilization of expenditure to the planned expenditure; the result
revealed that there was variance between approved budgeted expenditure and actual
expenditure. The variances which occurred were due to the fact that the Central
government does not transfer funds as per approved budget (refer Table 4.2 above),
fraud and embezzlement of revenue collected by revenue collectors was another
constraint. In year 2010/2011 expenditure exceeded revenue, this shows that the
57
council has outstanding debt to suppliers. In concluding the council does not utilize
its resources efficiently. The trend shown on Figure 4.7 below suggested that TDC
burning rate of expenditure was relatively satisfactory but did not clearly explain
whether the final beneficiaries enjoyed the benefits intended for them or not. The
issue behind the uncertainty of whether or not final beneficiaries enjoyed the
benefit was that the expenditure on investigation constituted more than 74.69% of
recurrent expenditure.

The study further revealed that although there were upward trends in both budgets
and actual expenditure, still the expenditure did not satisfy the intended result of
service provision as per sector category revealed from questionnaire responses and
official data in Table 4.4 below:

Figure 4:7 Expenditure raising trend of TDC between 2010 / 2014

Source: Survey data, 2015

58
Table 4.4 Capital expenditure in relation to service delivery

Amount in Millions („‟000000‟‟)

Services Amount Expenditure % of

budgeted (Tshs) Amount in (Tshs) implementation

Health facilities 5,714.33 2,025.22 35.44

Water supply and

3,816.45 1,189.89 31.18
sanitation

Roads Networks 3,289.79 2,258.54 68.65

Agricultural advisory
3,664.38 2,099.24 57.29
services

Education Provision 3,564.16 1,688.89 47.39

Other Projects 9,023.80 4,585.75 50.82

Total 29,072.91 13,847.53 47.63

Source: Audited financial statement (2014)

59
Figure 4.8: Capital expenditure in service delivery

Source: Survey data, 2015

An overview of people‟s satisfaction with service delivery based on questionnaires

and documentary review are shown below;

Health facilities: According to respondents and data accessed from comprehensive

council health implementation reports, majority of people were, in general, not
satisfied with health services. The satisfaction rating on health services
(dispensaries and health centre) was low. Only 25.7 percent of respondents were
satisfied with the health centre, while 22.9 percent were neither satisfied nor
dissatisfied and 51.4 percent were dissatisfied.

60
Table 4.5 Level of satisfaction of health service offered by TDC

Description Frequency Percent

Satisfied 9 25.7%

Neutral 8 22.9%

Dissatisfied 18 51.4%

Total 35 100%

Source: Survey data, 2015

Official data from dispensaries and health centre should be treated with care since
the quality of the report produced by them and submitted to the council health
administration differs from one another. According to the comprehensive council
health implementation progress report (CCHP 2014), the infant mortality rate has
been reduced, and the immunization rate has risen above 92% in the council.
Waterborne diseases decreased or under control in most of the dispensaries as
shown on Table 4.6.

Table 4.6 Health Services (CCHP Report)

Population (311,304) Year (2009) Year (2014)

Infant Mortality rate 10.2% 7.4%

Waterborne diseases (mainly diarrhea) 18,475 10,364

Immunization rate 80% 92%

Number of dispensaries and Health centre 28 42

Source: Survey data, 2015

61
Although there was an improvement on infant mortality and waterborne diseases,
people were not satisfied with the high costs charged by dispensaries and health
centre on health services provision as shown on returned questionnaire (refer to
Table 4.7).

Table 4:7. Consultation, Treatment and Medicine Charges treated by

dispensaries and health centre in TDC

Statement Frequency Percentage (%)

Yes 32 91.4

No 3 8.6

Total 35 100.0

Source: Survey data, 2015

Most health facilities need a user fee for every consultation and treatment, or fee on
annual basis for membership in a community Health Fund (CHF). On top of this,
the patients usually have to pay for the drugs and medicines. On the part of
financial statistics, the level of expenditure was 57% below the funds available; this
signals the possibility of low burning rate of the council or misuse of the fund to
unintended activities.

Water supply; According to respondents from questionnaire, it was 7 (20%) of

respondents were satisfied with water supply. Moreover, only 3 (8.6%) they were
neutral, and 25 (71.4%) were dissatisfied. In addition to returned questionnaires,
data obtained from the financial reports shows that it was only 35% of funds
implemented on water supply services (refer table 4.4 and figure 4.8 above).

62
Dissatisfaction with water supply was relative high 71.4 percent, the official data
provide good reasons why many people were dissatisfied with water supply (Table
4.8 below), show that about half of the population was not covered by adequate
water supply services, some of the ward and villages installed with shallow well,
but not functioning water scheme or water sources that should not be used during
rain or dry seasons.

Data on the quality of water sources was difficult to establish, one indicator used to
measure the quality of water was the number of cases of waterborne diseases. Data
from the council on waterborne diseases were not performing as per national
standard guideline and underreporting was often the case. According to medical
officer interviewed still the number of waterborne diseases reported show
alarmingly high in the council, as shown on Table 4.7 above.

Table 4:8. Level of water supply services offered by TDC

Statement Frequency Percent

Satisfied 7 20%

Neutral 3 8.6%

Dissatisfied 25 71.4%

Total 35 100%

Source: Survey data, 2015

63
Table 4:9. Water supplies (official data)

Population Year Year

(2010) (2014)

Population covered by adequate water supply service 13% 48%

Portion of population living more than 5km away from nearby drinking water 27% 22%
collection point

Number of shallow well 34 42

Quality of water supply; number of waterborne diseases 145,160 84,668

Source: Survey data, 2015

Table 4.9 above shows the general water supply profile in the district, population
covered by water supply had increased but still below half of population are
suffering from water services coverage. It was 13% in 2010 and 48% in 2014.
There was decrease of 5 km away from drinking water collections point from 27%
in 2009 to 22% in 2014, the decrease rate was contributed by the rural water supply
and sanitation programme. The programme constructed shallow well in different
ward and villages in the district. But still the number of kilometres reduced was
unsatisfactory. Furthermore number of waterborne diseases reduced to 48,688 in
2014 from 145,160 in 2009, which is almost half, but still the rate is high.

Education services: There has been an immense growth in the school enrolment
from year 2009 to 2014. Enrolment was close to 100% in all the council. This
success can be attributed to the abolition of school fees in 2001 and the
establishment of Primary Education Development Plan (PEDP) in 2002, by
channeling resources from the donor community, financed a basket fund, to

64
contribute with money and labour in the construction of new class rooms. In
addition to improving affordability and accessibility, PEDP may also have
improved the quality of primary education.

The pass rate has increased in the council, although the majority of class seven
pupils still failed to pass in 2008. Most of the council report progress in the quality
of education measured by indicators such as pupils per class room, pupils per desk,
pupil per text book and pupil per teacher.

Table 4.10 Primary education (official data)

Population Year Year

(2010) (2014)

Net enrolment Rate 56 98

Pupil per classroom 55 45

Average distance to nearby School 6 km 4 km

Portion of population living more than 5 km away from nearby school 15% 8%

Pupil per desk 4 3

Pupil per text book 6 3

Pupil per teacher 55 45

Source: Survey data, 2015

From the findings Table 4.10, enrolment rate increased from 56 percent in 2009 to
98 percent in 2014, the reason behind immense enrolment growth was the abolition
of school fees in 2001 and the establishment of Primary Education Development
Plan (PEDP) in 2002.

65
Number of pupils in one class room has decreased from 55 in 2010 to 45 pupils in
2014; this was a good indicator for education growth in terms of infrastructure.
Many primary schools have established in almost every ward throughout the
country, this reduced an average distance to nearby School from 6 km in 201o to 4
km in 2014. There was more decline in kilometres away from nearby schools, in
2010 it was 15 km to 8 km away from nearby school in 2014. The rations of pupil
per desk, per text book, and per teacher have been improved.

In providing infrastructure and services to the citizens, councils expend their

financial resources in the form of recurrent and capital expenditure. The recurrent
expenditure (sometimes called the routine expenditure), is concerned with regular
operation and administrative expenses like salaries of personnel, purchase of short
life equipment and stock, and the costs of routine repair and maintenance. Capital
expenditure is normally concerned with the creation of long term assets such as
construction of roads, school and other infrastructural facilities.

Good public expenditure management requires budget planning and preparation.

To be fully effective the public expenditure management system requires effective
means for achieving a resources allocation that reflects expenditure policy
priorities and efficient delivery of public services. Council is one of public
institution and they expend their financial resources to deliver service and
economic infrastructure for their citizens. The research responses from
questionnaire and official data, shows capital expenditure constitute a very
insignificant figure 13.8 billion (19.2%) compared to recurrent expenditure
amounted to 40.8 billion (57.38%) of total budgeted expenditure, stating from this
point, it is obvious capital expenditure as a good indicator of service delivery was
given very low emphasis as compared to recurrent expenditure.

66
Failure to manage public expenditure structure resulted to dissatisfaction of service
provision in health facilities, water supply and sanitation and only satisfaction on
education provision even though official data portrayed that establishment of
Primary Education Development Plan (PEDP) in 2002, had improved affordability
and accessibility of education in the district. Still TDC failed to consider public
expenditure structure in development projects. This was the problem to the council
since the funds used in development activities were relatively small, explaining
poor service delivery. The study in particular had attained the objective and
research question of revenue performance assessments.

This result is quite similar to Akujuobi et al. (2012) who carried research on Public
expenditure and economic growth, they concluded that the structure of public
expenditure will determine the pattern and form of economic growth and service
provision in the state.

Siddiqi, Iqbal and Jumshaid (2010) carried out Cointegration-Causality Analysis

between Public Expenditures and Economic Growth in Pakistan they found that
public expenditure expansion has significant effect on national income growth.
They further concluded that fiscal deficit reduces the output through taxes and
current expenditure (civil servant salaries etc) that negatively affect economic
sector‟s productivity and it also crowd out the economic sector investment as weak
credit market performance.

The study advice the management of Tabora District Council to install and
implement strong mechanism for involving lower level citizens to contribute their
prioritised projects which require capital expenditure in budget plan or Medium
Term Expenditure Frame Work (MTEF). This is very important, views of people

67
and their priorities should act as a yard load toward budget planning and ultimately
its implementation.

4.6: Relationship between government expenditure performances in relation to

service delivery

To see whether or not the council is efficient in its expenditure management, this
research has used ratio analysis of actually utilized capital expenditure to that of
planned expenditure. Effectiveness has been evaluated by analyzing the
achievement of the targeted or planned objectives (Service provision) of the
council. The total actual capital expenditure of the council shows 13.8 billion out of
71.2 billion total planned expenditure; Table 4.11 and Table 4.12 indicates that the
council utilized 19.44% of total expenditure.

Table 4.11 Capital expenditure and its impact to services delivery

BADGETED ACTUAL CAPITAL PERFORMANCE

YEAR
EXPENDITURE EXPENDITURE %

2009/2010 10,046.60 1,915.47 19.07

2010/2011 10,854.64 2,511.55 23.14

2011/2012 13,404.42 2,603.20 19.42

2012/2013 18,953.39 3,385.15 17.86

2013/2014 17,956.82 3,432.15 19.11

TOTAL 71,215.88 13,847.52 19.44

Source: Audited financial statement from (2010-2014)

68
The utilized capital expenditure of the council shows 13.8 billion out of 71.2 billion
planned expenditure. The implementation rate was not satisfactory, it was only 19
percent intended for service provisions and more than 80 percent was recurrent
expenditure. A regression result in Table 4.12 and Figure 4.9 depicts the
relationship between expenditure and service delivery.

Table 4.12 Estimation results: Ordinary Least Squares

Dependent variable: Capital expenditure

Variable Coeff Std. error t P>|t|

Estimated expenditure 0.1514** 0.026 5.81 0.010

Constant 613.0804 383.023 1.60 0.208

Number of Obs. = 5 Prob > F = 0.0102

R2 = 0.9184 Adj. R2 = 0.8912

Legend:

* = P < 0.1 ** = P < 0.05 *** = P < 0.01

Source: Survey data, 2015

69
 Figure 4.9: Relationship between expenditure and service delivery
20000
18000
SERVICE DELIVERY

16000
14000
12000
10000

2000 2500 3000 3500

EXPENDITURE

Source: Survey data, 2015

Regression results

Results show a significant correlation between actual Expenditure

EXP  613 .08  0.1514 BUD ………………………………….................................

(i)

Se = (2952..87) (1.044)

R 2  0.9184

r(exp, rev )  0.9583

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As Table 4.12 shows, the council‟s expenditure patten has been inconsistent. On the
other hand there were no well defined standards established to control the
expenditure as evidenced from the audit report (TNAO 2010). In addition to this the
accounting system employed by the council was designed to enhence expenditure
control, but it is not well implemented. From this it is easy to conclude that the
fluctuation from year to year is mainly caused by poor expenditure control,
inadequate accounting system, inadequency in reporting of financial performance
and weak linkage between planning and budgeting. From this it is easy to
understand that the council did not manage its expenditure properly for the last five
years. Therefore, it is difficult to say that the council is effecient in its expenditure
management the situation which indicate poor service delivery to the citizens.
Regression results in Table 4.12 show a significant correlation between actual
expenditure and service delivery.

The impact of budget estimates on expenditure (service delivery) as well as the

relationship between the two variables have been shown. The results from the
model indicate that an increase in expenditure by 1 percent leads to an increase in
service delivery by about 15 percent. This means that, other factors (such as
corruption, embelzzement, and missuse of public funds) being constant, as the local
government capital expenditure increase leads to increase in service delivery
delivery. The coefficient correlation 0.9583 reveals that there is a significant
relationship between expenditure and service delivery.

This also is evidenced by high R2=0.9184 which suggest that about 91 percent of
variation in service delivery has been explained by expenditure. Moreover, the
absolute value of t -statistics of the estimated coefficient expenditure is relatively
high showing that the model is statistically significant. As actual utilization of the
budgeted expenditure is less, the council can not achieve its targets or objectives

71
effectively, Weak monitoring and control capacity of the council has negatively
affected its expenditure management system. The weakness is caused by out dated
and inefficience internal control system of public funds that do attract fraudlent, and
mis appropriation of public funds.

The impacts of capital expenditure on service delivery as well as the relationship

between the two variables results from the model indicate that an increase in capital
expenditure by 1 percent leads to an increase in service delivery by about 15
percent. This means that, other factors (such as corruption, embelzzement, and
missuse of public funds) being constant, as the local capital expenditure increase
leads to increase in service delivery.

The coefficient correlation 0.9583 reveals that there is a positive relationship

between capital expenditure and service delivery. The results portray message to the
management of TDC that if they can restructure their system and accomodate the
element of effective planning, efficient and effective public expenditure
management, install strong internal control system, day to day mornitoring and
supervision through PETS and evaluating implemented projects to test value for
maoney, and have an instruments to hold officials and politicians accountable when
necessary. Public funds expended will benefit intended poor citizens. The objetive
of the relationship between ependiture and service delivery had been attained in this
discussion.

4.7 Challenges facing revenue collection in relation to service delivery

In order to have better control of revenue collection, the Government of Tanzania

initiated and implemented a number of local government reforms. These reforms
to a great extent, aimed at increasing the resources available to local government

72
sanctions and improving the administration of those resources. But of even greater
importance is the need to improve on the collection of revenue from the existing
sources of local government authorities.

Relatively a bit of effort has been directed at imparting improved procedures for
collection of revenue from council‟s own sources to council‟ staff. Despite certain
positive developments on the part of the Central Government, LGAs in the country
still face a number of setbacks. One such major administrative challenge is
inability to collect fully the revenue due to them. In this study the researcher,
through questionnaire examined different challenges facing the council in revenue
collections, as depicted from Table 4.13 below, 9.7 percentage of respondents
had shown that, there is administrative challenge in inability to collect revenue
since the work of revenue collection is on the hand of WEOs and VEOs instead of
being in the control of District Treasurer (DT); there was a huge gap between
actual revenue collections from projected revenue as it was shown from financial
reports of TDC, among other factors, it has proved that appropriate local revenue
bases are commonly weak. As not enough 9.2 percent of respondents revealed the
weak administrative capacity of TDC to assess taxes and levies and then to enforce
revenue laws and by-laws, moreover it has been noticed that there was no revenue
collections by laws.

In spite of having few revenue sources TDC had no by law for collection of
service levy, produce cess, forest produce cess, and the only applicable law is
produce cess law of 1985 which is outdated. Furthermore 11.4 percent of
respondents showed that there was education and motivation gap from the citizens
who had no idea on the importance of paying tax for some of revenue sources as
more respondents failed to understand some of the revenue sources available to
them as it has been shown on the Table 4.13 below.

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Corruption and embezzlement of revenue done by revenue collectors was another
constraint as it takes 7.4 percent. Political pressure on the revenue collectors to
relax on revenue collection took 7.4 percent, this happen when politicians
interference the whole exercise for their political interests of being in a position for
longer period.

Table 4:13. Challenges in revenue collection

Statement Responses Percent of Cases

Frequency Percent Percent

Late disbursement of development grants 22 8.10% 62.90%

Fraud and embezzlement of revenue collected 20 7.40% 57.10%

Failure to enforce rules and regulations 29 10.70% 82.90%

Failure to consider appropriately public expenditure 31 11.40% 88.60%

Failure to educate and sensitize taxpayers 31 11.40% 88.60%

Dependency on central government 34 12.50% 97.10%

Out dated revenue collection by- laws 33 12.20% 94.30%

Political pressure on revenue collection 20 7.40% 57.10%

Weak revenue collection base 25 9.20% 71.40%

Responsibility of revenue collection by WEOs and 26 9.70% 74.30%

VEOs

TOTAL 100.00% 774.30%

Source: Survey data, 2015

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As shown on literature review, in order to have better control of revenue
collection, the Government of Tanzania initiated and has implemented a number of
local government reforms. These reforms, to a great extent, intended at increasing
the resources available to local government authorities and improving the
management of those resources. Relatively efforts have been directed at improving
procedures for collection of revenue from council‟s own sources to council‟s
through training. Despite of efforts done by central government, LGAs still face a
number of impediments. One such major administrative challenge is inability to
collect enough revenue for them.

The findings from official data observed in Tabora District Council context, there
was revenue gaps between actual collection and estimates, this is an indication of
inability to collect revenue, and this has been shown by respondents that were due
to; Fraud and embezzlement of revenue collected, Failure to enforce rules and
regulations, Failure to educate and sensitize taxpayers, Out dated revenue
collection by- laws, Political pressure on revenue collection to relax on revenue
collection and weak administrative capacity to assess taxes and levies and then to
enforce revenue laws and by- laws. In particular the research question and its
objective in challenges facing revenue collections in LGAs have been attained.

4.8 Real situation at TDC with regard to revenue collection

Collection is the responsibility of the Council and is completely separated from the
central government. Revenue collection is organized and carried out by the council
but monitoring is organized around three levels, the responsibility rest with the
office of WEO. Besides monitoring revenue sources, the WEOs also handle
development issues and law-and-order functions at that level. For this purpose the
local armed force is at their disposal. At the village level, the responsibility to
monitor revenue sources lies on the office of the village executive officer. VEO is
75
also responsible for supervising village development activities and maintaining law
and order. The stated responsibilities justify inefficiency of revenue collections,
since these people are responsible for other activities apart from revenue
collections.

Comments from office of National audit (TNAO), suggests the need for
restructuring the responsibilities of revenue collections to be on the arm of District
Treasurer (DT); this is due to the fact that there was a huge gap between actual
revenue collections from projected revenue as it was shown from financial reports
of TDC, implications of this fact is inefficiency capability of WEOs and VEOs to
collect these revenue.

Among other factors, it has also proved from respondents that appropriate local
revenue bases are commonly weak. moreover it has been noticed that there was no
revenue collections by laws. In spite of having few revenue sources TDC had no by
law for collection of service levy, produce cess, forest produce cess, the only
applicable law is produce cess law of 1985 which is outdated.

It does not capture in the mind of the researcher for LGA as standing goverment
fails to institute strong revenue collection laws and by law,this is a weakness need
imediate correctiviness. Political interferance in revenue collection has shown as
another constraits to revenue collections, this is act of politicians to seek gain on
politics and ambitions to stay longer on that chance.

Data obtained from secondary sources revealed that tobacco produce cess is
collected at a rate of 5 percent of indicative prices instead of market price, some
individual avoid selling their tobacco produce cess at the auction through the
warehouse receipt system contrary to the requirement of the law. Moreover, TDC
76
is mandated to manage natural resources like forest and product extracted from
forest, TDC spends more money in respect of earning accruing the Ministry
responsible for natural resources available at Tabora District, It is only 5% of
revenue collected was returned toTDC. Implication of this statement is that central
goverment contribute much on this problem, because it seems very silent features
that central goverment benefit from these sources, Central goverment have to react
on this to bring autonomy of LGAs to fulfil their plans and objectives.

The district locally generated revenue amounts to an average of 5 to 6%, the rest 94
percent is from central government. This level of dependency undermines the
rationale of decentralization, affect service delivery and overall performance of the
district. Most grants from central government are conditional and therefore
earmarked for specific services. Only a slight degree of flexibility is permissible,
but even so with restrictions. The unconditional grant, which is the only grant that
LGAs may use as part of their revenues, is mainly used to pay staff salaries. In
many instance these funds are not adequate, and hence create a funding gap. The
findings from other researcher can be taken as a proof that these challenges may
affect revenue collection and hence poor service delivery.

Luzige (2006) in his research found that many of LGAs use their revenues
principally for administrative purposes, and LGAs should link between tax paid and
service delivery, he continued to say “unless tax payers perceive a linkage between
local revenue collection and service delivery they will not be willing to pay tax” as
a result reduce the level of public expenditure and unsatisfactory service provisions.

Zondani (2008) in his research report found that nonpayment of rates and service
charges has impact on the delivery of services by the municipality. The discussion
above show that the challenges has negative effect in the revenue collection and
influence poor service delivery in the council.

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 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMEDATIONS

5.1 Summary of the findings

The main objective of this study was to analyze the different problems and
challenges that affect revenue collection and expenditure in relation to service
delivery. Throughout this dissertation report, a number of issues were addressed as
related to the analysis of revenue collection and expenditure in relation to service
delivery. Specifically, the following were the findings.

5.1.1 The sources of revenue in Tabora District Council

The result found in chapter four regarding the identification of revenue sources in
TDC, data obtained from the financial report was arranged in tabular form and the
result portrayed that Government grant contribute 86 percent of TDC total revenue
followed by donor fund which constitute 8 percent and the lowest contributor was
the own source which took 6 percent of total revenue. It was observed that revenue
raised by the Local Government had dramatically declined leaving grant from
central government as the main source of financing local authority‟s expenditure
which is the challenges to the provision of local services.

Since grants from central government were not a reliable source due to its delay in
disbursement and even when disbursed early they were below approved budget, the
problem with government grant was conditionaly used only for the intended project
objectives set before and unconditional grant which had high percent was channeled
to administrative expenses like personal emoluments. Moreover, low own source
revenue collection was originated by education gap on the available sources of

78
revenue and failure to educate and sensitize tax payers on the importance of paying
tax, the council was also suggested to link tax collection and service delivery,
without doing so people will continue to evade from paying tax.

5.1.2 Assessment of revenue collection performance

Table 4.3 chapter four shows revenue collection trend from 2010-2014, the research
findings reveal that the council had good performance in revenue collection, for
instance in the fiscal financial year 2010/2014 TDC accounted a total of Tshs 6.9
billion and from there the trend kept on increasing until the financial year
2013/2014, in 2011/2012 it recorded the highest performance of 0.58 percent above
the budget estimate. The reasons contributed to good performance included early
and timely disbursement of funds from central government, the funds which
recorded the highest portion of recurrent expenditure (salary) and donor funds to
TDC; the other factor that contributed to increase in revenue collection was
outsourcing of revenue collectors, this involved hiring agents who were capable in
tax administration with low cost while increasing revenue collections.

The weather was a factor contributing to the increase in revenue collections. Good
and favourable weather conditions had contributed to rise of revenue sources that
depend mostly on weather conditions like tobacco cess and taxes from cereals
products. In the financial year 2012/2013 there was decline of 25.3 %in the
revenue collection. This shows that the budget and revenue collection system of
TDC is not designed in a way that encourages sustainable way of collecting its own
revenue. According to the data obtained from questionnaire revealed that the main
reason for decline was inadequate revenue collection system for own source
revenue, embezzlement of revenue collected in fact goes to individual pocket of
fraudulent officials, and grants from central government released below the
approved budget.
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5.1.3 Assessment of expenditure performance

Table 4.9 and Figure 4.4 in chapter four shows that there was overall expenditure
performance in TDC, even though the result revealed that there was a small variance
between approved budgeted expenditure and actual expenditure.

The variances which occurred was due to the fact that the Central government do
not transfer funds as per approved budget, failure to educate and sensitize taxpayers
on the importance of paying tax, furthermore failure to enforce rules and regulations
of revenue collections; fraud and embezzlement of revenue collected by revenue
collectors. The trend suggested that TDC burning rate of expenditure was relatively
satisfactory but did not clearly explain whether the final beneficiaries enjoyed the
benefits intended for them or not.

The issue behind the uncertainty of whether or not final beneficiaries enjoyed the
benefit was that the expenditure on investigation included more than 74.69% of
recurrent expenditure as shown on the allocation of funds in Table 4.4. In addition,
to secondary data Councilors, Ward Executives, village and Executives were asked
through questionnaire on what percentage usage of funds received by TDC was
assigned to development expenditure?, the majority of respondents argued that 0-
19% allocation to development expenditure was from own source and donor fund,
20-29% was from government grant.

5.1.4 Challenges facing government revenue collections and service provision

It has been observed that, there is administrative challenge in inability to collect

fully the revenue; there was a huge gap between actual revenue collections from
projected revenue, among other factors, appropriate local revenue bases are
commonly weak or too administratively complex for LGAs to handle. This problem
was owing to weak administrative capacity to assess taxes and levies and then to

80
enforce revenue laws and by-laws, there was education and motivation gap from the
citizenry who had no idea on the importance of paying tax for some of revenue
sources as more respondents failed to understand some of the revenue sources
available to them. Corruption and embezzlement of revenue done by revenue
collectors was another constraint, Political pressure on the revenue collectors to
relax on revenue collection, this happen when politicians interfere the whole
exercise for him or her political interests of being in a position for longer period.

Data obtained from secondary sources revealed that tobacco cess is collected at a
rate of 5 percent of indicative prices instead of market price, some individual avoid
selling their tobacco cess at the auction through the warehouse receipt system
contrary to the requirement of the law. Moreover TDC is mandated to manage
natural resources like forest and product extracted forest, TDC spends more money
in respect of earning accruing the Ministry responsible for natural resources
available at Tabora District, It is only 5% of revenue collected return to TDC.

In spite of having few revenue sources TDC has no by law for collection of service
levy, produce cess, forest produce cess, the only applicable law is produce cess law
of 1985 which is outdated. Furthermore, TDC is highly dependent on the central
government and donors for its budget support. The district locally generated revenue
amounts to an average of 5 to 6%, the rest 94 percent is from central government.
This level of dependency undermines the rationale of decentralization, affect service
delivery and overall performance of the district. Most grants from central
government are conditional and therefore earmarked for specific services. Only a
slight degree of flexibility is permissible, but even so with restrictions. The
unconditional grant, which is the only grant that LGAs may use as part of their
revenues, is mainly used to pay staff salaries. In many instance these funds are not
adequate, and hence create a funding gap.

81
5.1.5 The relationship between government expenditure in relation to service
delivery

The researcher used correlation coefficient using the statistical package called
STATA to test the relationship between expenditure as an independent variable and
service delivery on the other side as dependent variable for time series data (2010-
2014). The results from the model indicated that an increase in expenditure by 1
percent leads to an increase in service delivery by about 15 percent. This means that,
other factors (such as corruption, embelzzement, and missuse of public funds) being
constant, as the local government expends more in capital expenditure leads to
increase in service delivery. The correlation coefficient 0.9583 reveals that there is a
relationship between expenditure and service delivery. This also is evidenced by
high R2=0.9184 which suggest that about 91 percent of variation in service
provision have been explained by capital expenditure. Moreover, the absolute value
of t -statistics of the estimated coefficient capital expenditure is relatively high
showing that the model is statistically significant.

Apart from the relationship results, the situation in TDC was quite different from
STATA result, the returned questionnaires showed that majority of people were, in
general, not satisfied with health services, the council own data presented improve
in quality of service provision as the infant mortality rate has been reduced, and the
immunization rate has risen above 92% in the council.

Waterborne diseases were on decrease or under control in most of the dispensaries.

However the main problem was that most of health facilities require a user fee for
every consultation and treatment, or fee on annual basis for membership in a
community Health Fund (CHF). On top of this, the patients usually have to pay for
the drugs and medicines. Financial data accessed during data collection showed that
the level of expenditure was 57% below the funds available; this signals the
82
possibility of low burning rate of the council or misuse of the fund to unintended
activities.

Water supply, dissatisfaction with water supply was relative high 71.4 percent, the
official data explained the presence of diarrhea reduced rate to 10,364 in 2014 but
was still above the national average standard, moreover researcher found out that
half of the population was not covered by adequate water supply services as it was
shown on the official data, it was only 48% of population covered by adequate
water supply service, there was still high percentage about 22% of population living
more than 5 kilometre away from nearby drinking water collection point. Number
of shallow well was 42 for population of 311,304, some of the ward and villages
installed with shallow well, but not functioning water scheme or water sources that
should not be used during rain or dry seasons.

Education services; There has been an immense growth in the school enrolment
from year 2010 to 2014. Enrolment was close to 100% in all the council. This
success can be attributed to the abolition of school fees in 2001 and the
establishment of Primary Education Development Plan (PEDP) in 2002.

5.2 Conclusion

The purpose of this study was to analyze the relationship between revenue
collection and expenditure in relation to service delivery, the findings from chapter
four shows that there is a positive relationship between expenditure and service
delivery at correlation coefficient of 0.9583 and any increase in expenditure by 1
percent leads to an increase of service delivery by 15 percent. The result signifies
the need for TDC to improve expenditure perfromance by re assessing their
planning and implementation status. Involvement of lower levels citizens in budget

83
planning is very important because it give room to identify their priotised
development projects.

Moreover, the council has to install strong internal financial controls system and
public expenditure tracking survey should be stroghly implemented. Capital
expenditure and recurrent expenditure were not properly managed in a manner that
will raise the quality of service delivery and heavy dependant on central
government grant was another problem hindered the main objective of LGAs to
provide good services to its people. On other hand council has to increase tax base
as it had showed a fundamental declining of better and quality service delivery
because of poor internal revenue collection, In snapshot TDC is lacking financial
support particularly from its people (tax payers and central government through
their conditional grant).

5.3 Policy Implications

Public expenditure in Tanzania is mainly guided by a participative method called

the Public Expenditure Review (PER). This has been continuing process since
fiscal year 1998/99 and comprises stakeholders from, the ministry of finance,
president‟s offices for planning and privatization, Public service management and
Regional administration and Local Government. The traditional PER functions
focused on the budget process in terms of management, control and accountability.
The fundamental objective was to evaluate budget performance against approved
targets and procedures or processes and identify shortcomings and corrective
measures.

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In general, the objective of the current PER for a three year period is to improve
budget management and the main focus is: first to improve predictive value of the
budget, second to enhance budget sustainability, third to promote prioritization of
expenditure objectives and a locative efficiency in line with the National Poverty
Reduction Strategy. Fourth to ensure increased shift of donor finance towards
broader budget support which streamlines external support behind a government led
process and fifth to strengthen an output oriented budget that focuses on service
delivery improvements.

The findings of this study showed poor expenditure management and unsatisfactory
service delivery to the citizens. The study recommended various measures which
are parallel to the current expenditure policy which require LGAs to strengthen an
output oriented budget that focuses on service delivery improvements.

5.4 Recommendations

Dissatisfaction of services delivered by TDC has apparently contributed by poor

public expenditure structure in terms of capital expenditure and recurrent
expenditure and heavy dependence on the central government conditional grant and
low capacity of revenue collection. Starting with the problem of poor public
expenditure management, the study came upwith viable suggestions to TDC; if
those suggestions are followed then positive impact on realistic expenditure may be
justified.

5.4.1 Public Expenditure structure

Public expenditure structure in terms of capital expenditure and recurrent

expenditure has been noticed by study as among factors that hinder efficient and
effective service delivery. Author contributes on the following; Firstly, LGAs
85
should ensure that capital expenditure and recurrent expenditure are properly
managed in a manner that it will raise the level of service provision and people‟s
satisfaction. LGAs should review its budget preparations for coming years by
involving lower levels, so that their priorities can be identified.

More funds should be assigned to development activities like Health, schools, road
networks, water supply and sanitation and agriculture advisory services to mention
few, currently as noticed on chapter four, recurrent expenditure takes 74.69 percent
while development activities lies on 25.31 percent on the revenue collected which
is untidy to the general economic growth. Moreover, there should be keen followup
on funds expended in development projects, strogh PETS should be implemented in
order to identify any deviation on development projects implementations, laws
regarding misappropriation of public funds should be implemented strictly to hold
accountable any one who go astray the law.

5.4.2 Advocacy for Change Budget Architecture

The high dependency on central government transfers makes the district a mere
agent of central government rather than fully fledged local government. TDC should
work with other local governments through the Association of Local Government in
Tanzania (ALAT) to advocate for a change in the current budget architecture. It is
important that the national budget resources should be equally shared between
central government and local governments so that local governments do not have to
depend on conditional grants.

5.4.3 Investment Potentials

It have to be understood that Government, both central and local authorities, have
the potential to engage in commercial activities, this can be done through investing

86
in the companies they do not have a power to control them, as is the case currently
different LGAs in Tanzania have acquired shares in different companies, like
Masasi District Council (MDC) invested in Tanzania Tea Packers (TATEPA).
Researcher advises TDC to allocate some of its internal generated fund to buy
shares. As it was in MDC to TATEPA, investing in stocks of commercial
enterprises is additional revenue sources if substantial investment made.

TDC should take advantage of the existence of Dar es Salaam Stock Exchange
(DSE) to invest in well performing listed companies. For example, the current sale
of precision air shares and Tanzania Breweries Limited (TBL) can be viewed along
those listed companies. In other way round in order to increase revenue to the
LGAs, they have to establish commercial undertakings in the form of corporation as
it used to be the case of District Development corporations (DDC) in 1970s and
1980s. The defining traits of such business are that, they have a distinct legal form
and established to operate in commercial affairs. Furthermore, LGAs may also have
public policy objectives, which distinguish it from other established government
agencies pursuing purely non financial objectives that have no goal of satisfying
shareholders through dividends.

Having similar objective will lead to non performing enterprises as the case was in
privatization policy in Tanzania. It is possible for TDC to generate own source
revenue by way of surplus from such undertakings. Another chance to increase
revenue is by encouraging and support the growth of private sector business as a
way of increasing tax potentials that can tap subsequently.

87
5.4.4 Enhancing own source revenue collection capacity

According to Government budget estimates for the financial year 2010/2011. LGAs
were anticipated to collect revenue amounting to Tshs 172.582 billion which is
equal to 2.9 percent of total domestic revenue collected by Central government. The
government itself acknowledged that the amount was very small compared to
revenue source potentials available in the LGAs.

Ministry of Finance and Economic Affairs (MOFEA), through its Minister for
finance asked the central government to strengthen the capacity of LGAs in
identifying new sources and improve efficiency in revenue collections for existing
sources, from this statement TDC should exploit this opportunity to identify new
revenue sources and enact effective by laws and reviewing existing ones. For this
cause of action TDC is required by researcher to adhere to the following reforms
strategies in order to increase revenue collections.

i. Strengthen legal framework

In the course of conducting this research some of legal framework for revenue
collections became a subject. First, revenue by laws seem to be outdated, for
instance TDC (service levy) by laws, 2004 service levy was collected from every
resident business in respect of all activities like, agriculture , production,
processing, distribution of goods and rendering services. By-laws are silent on
measures that can be taken to recover unpaid levy. Moreover, conviction in a court
of law for non compliance with by laws attracts a fine not exceeding Tshs 50,000 or
jail term not exceeding twelve months or both sanctions.

For year 2010/2012, service levy amounted to less than 5 million was collected yet
Tanzania Revenue Authority (TRA) indicates that there are 14 business enterprises,
which are Value Added Tax (VAT) registered and liable for paying tax. What

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currently contributes to this is a vigorous provision in the by-laws for effective
enforcements of service levy.

To alleviate from this problem, service levy should be attached to assets such as
Bank account as practised by TRA, in case of defaulters in respect of central
government taxes. On the other hand, fees and charges, by laws of 1985 need
regular updating and adjustment to reflect inflation. Having a sound; legal
framework, is much appreciated, researcher suggests TDC to hire consultants for
adjusting these by laws when need arise.

ii. Introducing Property rates

Currently, TDC does not impose property tax. Given the heavy reliance from
central government transfers and limited tax base left to LGAs, there is need for
TDC to start utilizing this obvious revenue sources. It was normal to hear from
some of TDC officials that property rate tax can be legally levied only by an urban
authority, but this is not the case. When you refer section 13 and 15 of the Local
Government Finance Act, Cap 290 lays down this mandate clearly. In this aspect,
the later section, for example, lead as follows.

Subject to prior approval of the Minister, and to the provisions of subsection (2), a
local authority may make and levy an annual rate on every person of or above the
age of eighteen years who is a person in respect of whom, or a member of a
category or description of a persons in respect of which the function of the authority
are exercisable and who resides or owns property.

According to the PMORALG By- laws Database, there are several District Councils
which have, at one point in time, exercised their powers to impose property rates,
Example of few are: Bariadi District Council (BDC) through government Notice
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No. 653 of 1998, Kwimba District Council (KDC) through government Notice No.
78 of 2000 and Handeni District Council (HDC) through government Notice
No.283 of 1999. It is proposed that TDC considers introducing a flat rate property
tax system that will differentiate between properties at different locations like
trading centres, surveyed area, and non surveyed area. The rate could be set at
amounts that are sufficiently low for all households in the district to afford.

iii. Fees and Charges

As already indicated LGAs have the power to raise revenues from taxes, levies and
fees. They are then allowed to set their own revenue policy within the limits set by
Central Government.

It is suggested that TDC ratify the (Fees and Charges) By laws. 1989 afresh and
consider introducing the following fees and charges:

a) Business and professional license

Private health facility licence fee, motor cycle license fee, plying permit fees and
other business licence fees

b) Other taxes on the use of Goods, permission to use Goods

In this category the following are suggested to be added, Building materials

extraction licence fee and scaffolding/ Hoarding permit fees.

c) Administrative Fees and Charges

Apart from sources exist in this category; the following suggested sources are
important to be taken care off. Building permit fees, Health facility user charges,
Livestock dipping fees, Artificial insemination service fee, permit fee for
billboards, posters or hoarding, land survey service fee, Building valuation fee, and
sale of seedlings.

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5.4.5 Streaming revenue administration

It is very important to establish an effective and efficient revenue administration

system that will be responsible for enforcement of all revenue by laws as well as
accounting for the revenue collected. It would appear logical to centralise this
function in Finance Department under the District Treasurer. Given the current
network system of Village Executive Officers (VEOs) and Ward Executive Officers
(WEOs), administering the enhanced TDC own source revenue system should add
little, if any, additional costs to the council.

5.4.6 Outsourcing revenue collections

Outsourcing revenue collection by LGAs has been a normal practise in Tanzania.

Several LGAs have outsourced administration of certain revenue sources including
property rate, market fees, forestry levies, livestock auction and abattoir fees.
Outsourcing has been excised through market associations, cooperatives and private
firms especially those dealing with debt management. In assessing the success of
outsourcing, it has been noticed although outsourcing does not offer a quick
increase in revenue and easing administration, in general, revenue from the
outsourced sources did actually increase with significant improvement in
predictability as well (REPOA,20080). So, the researcher advises the TDC
management to outsource some of their potential revenue sources.

5.4.7 Computerization of revenue management

In order to enhance efficiency and minimization of human error and corruption

rooms, a simple computerised revenue management system would be feasible. Such
a system should be able to automate the key tax administration functions of
registration, assessment, collection and accounting for revenue collected. The
Institute of Tax Administration (ITA) has recently designed a similar system at

91
affordable costs to manage local revenue collection in three states of the newly
established Republic of South Sudan. The system is known as Simplified
Computerized Tax Administration System (SICTAS). Its upon TDC to acquire this
system in order to enhance their revenue collections.

5.4 Limitations of the Study

This study encountered several limitations as follows: First, disclosure of some of

the relevant information like Revenue earned was not easy since most of the
business people look at this as a private issue. This led to a delay in accessing
information since this information was relevant for the research report. But the
researcher guaranteed the respondents on confidentiality of the data given that all
information given was for research purposes and not otherwise.

Second, shortage of resources such as transport and funds since the researcher was
required to travel to different study areas. Sometimes the researcher used to walk to
some areas where transport was a problem.

Third, time allocated to complete the research report was limited hence the
researcher was taking more hours on concentrating on research studies and even
during midnight to ensure that he completed the study within the allocated time.

Fourth, the study used both primary and secondary data of which secondary data
may be difficult to access them due to poor record keeping. Due to this problem the
researcher used more time and involved more staff in order to get the required
adequate data.

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Lastly, language barrier was an obstacle on my study, so for those who were not
familiar with the language used, the researcher facilitated by hiring a translator so
that the informant were able to respond accordingly.

5.5 Areas for Further Research

During this research, a number of interesting areas were identified and it was not
easy to cover to them all, hence I had to narrow them down to the topic under study.
Therefore, findings established in this study might not provide the comprehensive
picture for the whole country and all areas of concern; further researches are
recommended. Thus, the following areas deserve to be further researched are as
follows. The role of quality supervision on Service Delivery in Local Governments
Authority. The use of Finance knowledge by administrative staff and the level of
service delivery in Local Governments Authority. Why more of revenue collections
in local government authorities are used in recurrent expenditure. Revenue
management and service delivery also invite the need for further research in Local
Governments Authority. The effect of motivation on Service delivery in Local
Governments Authority. The effect of corruption on service delivery in Local
Governments Authority. Macroeconomic plans to address poverty and
unemployment in the district do not attract sufficient attention in service delivery

93
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 APPENDICES

Appendix .1 Survey Study Questionnaire

I am conducting a research on Analysis of revenue collection and government

expenditure in relation to service delivery, A case of Tabora District Council. The
research requires conducting interviews with various stakeholders including you.
The information hereby obtained is solely for academic reasons and all your
responses will remain confidential. We will be extremely grateful if you agree to
collaborate with me and give some time to answer a set of questions we have. The
questions are designed to help us understand revenue collection and government
expenditure in relation to service delivery. We thank you for your time and eagerly
hope for your cooperation.

IDENTIFICATION

DATE OF INTERVIEW ………….. ………….. 2015

Day Month Year

INTERVIEWER: Josephat B. Nsana

1. Gender of the respondent

[ ] Male [ ] Female

2. Respondent‟s length of service

[ ] Below 3 years
[ ] 3 – 5 years
[ ] Above 5 years

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3. What is your function in this district council?
[ ] Treasurer
[ ] Revenue department
[ ] Expenditure department
[ ] Accountant assistant
[ ] Other

4. Education level of Respondents

[ ] Primary level
[ ] High school level
[ ] University level
[ ] Other

5. What are the sources of revenue for Tabora District Council between years
2010 to 2014
6. What is revenue performance at Tabora District Council between years 2010
to 2014
7. What is expenditure performance at Tabora District Council between years
2010 to 2014
8. How does government expenditure relate to government performance in
terms of service delivery at Tabora District Council between years
2010/2014
9. What are the challenges facing government revenue collections and service
provision at Tabora District Council between years 2010/2014

Thank you for your time and Assistance

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APPENDIX II A: SUMMARY OF TDC REVENUE COLLECTION ON CATEGORY BASIS

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APPENDIXII B: SUMMARY OF TDC EXPENDITURE ON DEVELOPMENT ACTIVITIES

102
APPENDIX II C. SUMMARY OF TDC EXPENDITURE ON RECURRENT ACTIVITIES

103