The role of internally generated funds in the development of MMDAs

The role of taxes in the development of nations cannot be overemphasized, no nation can develop and give its citizens good roads, healthcare and good standard of living without taxes.

The developed countries that have make giant strides in education, infrastructure and have become the yardstick for others to emulate to reach their level, developed their countries through taxes.

Taxes are classified into Tax Revenue and Non-Tax Revenue. Tax revenue are the income gained by the state through taxation. Tax Revenue is from sources such as income taxes, property taxes and corporate taxes which is classified as Direct Tax whereas taxes such as Excise Tax, Value Added Tax (VAT) and Service Taxes fall under indirect tax.

In Ghana, the Government gets revenue from these taxes which is used in undertaking developmental projects such as the building of schools, hospitals and also fund other social interventions such as the Livelihood Empowerment Against Poverty (LEAP), Free Secondary Education and Free Maternal Care.

Non-Tax Revenue is revenue from sources other than tax revenue which also helps in the development of nations. Non-Tax Revenue is often referred to as Internally Generated Funds (IGF) and it’s a major source of revenue for the Metropolitan, Municipal and District Assemblies (MMDAs).

MMDAs depend on other sources of revenue such as the District Assemblies Common Fund from the Central Government, donor funds such as the Urban Development Grant (UDG) for Metropolitan and Municipal Assemblies (MMAs) and District Development Facility (DDF). The District Development Facility (DDF) is a pool of funds that is shared amongst MMDAs based on a District’s performance in the District Performance Assessment Tool (DPAT), an annual assessment of the performance of MMDAs.

Metropolitan, Municipal and District Assemblies are empowered by the Local Governance Act, 2016, Act 936 to collect Non-Tax Revenue within their jurisdiction for the development of their Districts.

There are currently Two Hundred and Sixty (260) Metropolitan, Municipal and District Assemblies (MMDAs) in Ghana, Assemblies serve as the administrative machinery for the developments of their respective Districts. The MMDAs are supposed to develop their localities and give them a befitting standard of living without inhabitants necessary depending on Central Government for development.

Metropolitan, Municipal and District Assemblies, however, depend on the Central Government to fund capital-intensive projects such as the building of roads, hospitals and water systems. Such projects usually require huge financial outlay which the MMDAs may not be in a position to fund.

The Non-Tax Revenue of MMDAs is from sources such licenses, fees and miscellaneous charges, fees and fines, investment income and rates. All these sources of revenue bring in funds into the coffers of the MMDAs for the development of their respective Districts.

Property owners are expected to pay an annual property rate based on valuation by the Land Valuation Board and this is another source of revenue for MMDAs. It has been argued that MMDAs in urban centres like the Adentan Municipal Assembly can rake in more revenue from property rate than any source of revenue considering the many buildings and the rate of developments within their jurisdictions.

The sale of jackets for new buildings and payment of building permits are also sources of revenue for the MMDAs. The physical planning and works departments are mandated to ensure all buildings have permits and are sited in authorized areas.

Non-Tax Revenue plays a critical role in the development of MMDAs, recurrent expenses such as purchase of stationary, purchase of fuel are all funded from IGF as the DACF and other donor funds are for capital expenditure.

Many a times, citizens have the erroneous impression that revenue collected by MMDAs are not accounted for and are therefore reluctant to pay their tolls, but this assertion is far from the truth. Revenues collected by MMDAs are banked within 24hours as stipulated by law and the accounts are audited at the end of every financial year by the Ghana Audit Service, this ensures every pesewa collected is accounted for.

Indeed, without Internally Generated Funds, the running of MMDAs would severely affected as critical logistics needed by personnel of the MMDAs to deliver would be non-existent and administrative operations would be affected.
Under the District Performance Assessment Tool (DPAT), MMDAs are required to use at least 10% or more of their IGF for capital expenditure, and MMDAs that fail to do so lose marks under the performance indicator.

MMDAs also use part of their IGF to support the activities of Decentralized Departments, Departments such as Works and Agriculture benefit from IGF as their activities are funded from revenue collected within the District. This is also a performance indicator under the District Performance Assessment Tool (DPAT).

Non Tax Revenue plays a crucial role in the security of MMDAs, some MMDAs fund the operations of security agencies within their jurisdictions by buying fuel for them. The provision of street lights within MMDAs are also funded from Assembly’s IGF and this goes a long way to make citizens feel safe at night.

It is clear that the role of Non-Tax Revenue or IGF in the Development of MMDAs cannot be gloss over, so the next time a revenue collector approaches you to either pay your property rate or a fee on a business you are operating in a District, don’t hesitate to pay as your funds is critical to the development of your District.

God bless Ghana.

Dennis Takyi
Controller and Accountant General’s Department
Fanteakwa North District Assembly. Begoro.
Dennis.takyi81@yahoo.com