In 2009, the World Bank engaged ICMA to provide recommendations to Lebanon’s Ministry of Interior and Municipalities (MoIM) that would create a roadmap to strengthen and modernize the municipal finance system.
Issues included the lack of transparency and efficacy of the intergovernmental finance system and the inability of the municipalities to raise revenues, which jointly restricted the effectiveness of local entities. Since the municipalities had few revenue sources of their own the unpredictability and insufficiency of the funds flowing from the national to the local level prevented them from meeting the expressed interests and needs of their constituents.
The Lebanon Municipal Finance Studies Project, carried out from January 2010 to February 2011, developed studies that focused on three key subject areas: (1) strengthening the municipal finance framework; (2) assessing the independent municipal fund; and (3) property tax modernization.
The ICMA team of Lebanese experts and U.S. consultants, including pro bono advisors, first examined the constraints facing municipal finance and identified the priority actions that needed to be taken to address them. They examined the legal framework, assessed the existing situation based on focus groups with municipal council presidents and municipal finance officers as well as interviews with central government officials, and collected municipal expenditure and revenue data. The team convened a “virtual advisory panel” of individuals who met telephonically from various U.S. locations and from Beirut to review draft documents and shape the final recommendations.
The study developed 138 recommendations, which were reviewed by the MoIM, the Ministry of Finance, and the World Bank. The recommendations were designed to achieve the following:
- Increase the transparency, efficiency, and accountability of municipal financial operations through sound budgeting, accounting, and financial management systems
- Increase the predictability, reliability, equitability, and timeliness of revenue transfers from the national to the local level
- Increase the financial autonomy of municipalities by improving their ability to raise revenue at the local level through property taxation.
The recommendations were based on four guiding principles:
- The responsibilities assigned to municipal government should be congruent with the assigned resources.
- The municipal finance function should be professionalized to the maximum extent possible.
- Municipal finance operations should be conducted in an economical and cost-effective manner.
- The financing of municipal government should contribute to local economic development.
After the completion of the project, the Lebanese prime minister established a decentralization committee tasked to draft a decentralization law. The current draft of this law in the making incorporates many of the recommendations of the three studies.