Zambia established the Local Government Equalization Fund (LGEF) in 2014. The legislation provided that The Minister responsible for local government may, in a financial year, make the receipt of part or all of the funds to be disbursed from the Fund to a council conditional upon the council observing sound financial management practices in the council and the delivery of a prescribed minimum level of service.

Government reformers are interested in setting up a performance-based system that will provide incentives to encourage local governments to improve financial management, revenue mobilization, service delivery, human resource management, participatory governance and service delivery.

As a consultant, you have been hired to provide your input on the following:

The Auditor General has proposed that strict performance conditions be applied to all LGEF funds. She proposes to make it a minimum condition that LGs must receive an Unqualified Opinion on their audited accounts from the previous audited year to be eligible to receive funds in subsequent years. She argues that LGs that do not have good clean accounts will only waste the LGEF funding, therefore, it would be financially irresponsible to give them any LGEF funding.

According to information from the Auditor General, there were only 4 LGs with unqualified audits, 65 with qualified audits and 32 with adverse audits in 2013. See Table for trend.

Audit Status	2011	2012	2013
Unqualified	5	8	4
Qualified	60	65	65
Adverse	36	28	32
Total	101	101	101

The Local Government Association has argued that this minimum condition would be too harsh. They state that it would be unfair to penalize the local residents just because the local government has failed its minimum conditions. They argue that the status of the audit should not be used as a minimum condition but should be incorporated as a performance condition.

Do you agree or disagree with these arguments by the Auditor General and the Local Government Association? What would you recommend regarding the minimum conditions?

The Ministry of Education has suggested that there is need to allocate 25% of the LGEF funds for capacity building targeted to help underperforming LGs improve their capacity to meet the performance conditions. The Ministry of Public Administration argues that these training funds should be allocated to their budget to provide relevant workshops at their national Government Training Institute in the capital city to ensure the highest quality and appropriate training support. Others argue that the training should be provided by private and/or public regional training institutes as chosen by LGs

Do you agree or disagree with this suggestion by the Ministry of Public Administration?