This chapter focuses on expenditure assignment – the determination of the functions for which local governments are responsible, and the level of discretion they should have in deciding on their expenditure budgets. The analysis reviews both theory and practice with respect to ensuring that public expenditures are adequately controlled, accountable and efficient, and concludes that no country ever seems to get expenditure assignments completely right. While the reasons vary from country to country, they generally arise from the complex way economic concerns, public management and politics interact. The chapter concludes by setting out some principles that might guide how local governments can organize and manage the expenditures with which they are charged in ways more likely to realize the potential benefits of fiscal decentralization.
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