Performance Assessment of

Association of District Development Committee of Nepal

(ADDCN)

A Study Report

Submitted to DanidaHUGOU

PRAD Nepal Jhamsikhel, Lalitpur

October, 2006

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Study Team

Mr. Prithvi Raj Ligal Dr. Devendra Prasad Shrestha

Mr. Kumar Keshar Bista Mr. Kishor Maharjan

The analysis and views expressed in this report are those of PRAD Nepal and, not necessarily those of DanidaHUGOU

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Table of Content Page

ACKNOWLEDGEMENT ....................................................................................................v Acronyms .............................................................................................................................vi EXECUTIVE SUMMARY.................................................................................................vii

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

1.1 Background ......................................................................................................1 1.2 Rationale of the study.......................................................................................1 1.3 Objectives of the Evaluation ............................................................................1 1.4 Scope of Work ..................................................................................................2 1.5 Study Methodology...........................................................................................2 1.6 Analytical Approach .........................................................................................4 1.7 Study Limitation ...............................................................................................4 1.8 Organization of the study report .......................................................................5

CHAPTER TWO ..............................................................................................................6

ASSOCIATION OF DISTRICT DEVELOPMENT COMMITTEES OF NEPAL: ....6 AN OVERVIEW...........................................................................................................6

2.1 Introduction to ADDCN....................................................................................6 2.2 Vision and Goal ................................................................................................6 2.3 Objectives..........................................................................................................6 2.4 Output and Strategies ........................................................................................6 2.5 Organizational Structure of ADDCN................................................................7

CHAPTER THREE...........................................................................................................9

ADDCN: STATUS OF ACHIEVEMENTS ...............................................................9 3.1 Background .......................................................................................................9 3.2 Achievement Status...........................................................................................9

CHAPTER FOUR...........................................................................................................22

PERFORMANCE OF ADDCN: STAKEHOLDER’S PERSPECTIVE ....................22 4.1 Background .....................................................................................................22 4.2 Perception of Former Elected Representatives and DDC officials.................22 4.3 Perceptions of Government agencies including MOLD .................................26 4.4 Donors Perception...........................................................................................26 4.5 Other Local Bodies Associations (MUAN & NAVIN) ..................................27 4.6 Other related agencies:....................................................................................28

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CHAPTER FIVE.............................................................................................................30 SWOT ANALYSIS.........................................................................................................30

5.1 Strengths...........................................................................................................30 5.2 Weakness .........................................................................................................31 5.3 Opportunities....................................................................................................31 5.4 Threats..............................................................................................................32

CHAPTER SIX ...............................................................................................................33 FINANCIAL SUSTAINABILITY OF ADDCN............................................................33

6.1 Overall Position of Sources and Uses of Fund of ADDCN.............................33 6.2 Trend and Pattern of Income Sources ..............................................................36 6.3 Trend and Pattern of Expenditure ....................................................................39 6.4 Issues regarding Financial Sustainability of ADDCN: ....................................41

CHAPTER SEVEN.........................................................................................................42 SOME KEY ISSUES AND DONOR'S SUPPORT........................................................42

7.1 Key Issues ........................................................................................................42 7.2 ADDCN’s Unfinished Agenda ........................................................................47 7.3 Need for Continuing Donor Support................................................................47 7.4 Conclusion .......................................................................................................50

Reference..........................................................................................................................51

Annexure

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ACKNOWLEDGEMENT

PRAD Nepal is highly privileged to have the opportunity to undertake this study on "Performance Assessment of Association of District Development Committee of Nepal (ADDCN)”. PRAD Nepal wishes to place sincere thanks to the Steering Committee members for constant support and guidance during the study. The study team appreciates the untiring support extended by the Steering Committee members particularly, Mr. Bandhu Ranjan, Advisor Danida HUGOU, and Mr. Hem Raj Lamichhane, Executive Secretary General, ADDCN. The support of Mr. Parashuram Upadhyaya, LG Legal Expert, ADDCN has also been of immense help. We are equally thankful to Mr. Shambhu Dev Baral and Mr. Nawa Raj Koirala, ADDCN for their support. The guidance provided by Mr. Ivan M. Nielsen, Program Coordinator, DanidaHUGOU helped the team to shape up the study and to look at the issues confronting ADDCN at greater depth. PRAD Nepal acknowledges his guidance and thanks for the support. Dr. Hikmat Bista, Senior Advisor also deserves special thanks for sharing insights on ADDCN. Chairman Mr. Krishna Prasad Sapkota, Mr. Madhav Poudel, immediate Past-Chairman of ADDCN and the members of ADDCN Executive Committee Mr. Lal Kumar KC, Mr. Jiwan Bahadur Shahi and the founder Chairman, Mr. Krishna Lal Sapkota helped the team in clarifying many of the issues facing ADDCN. Similarly, the Ex-Chairman, Ex-Vice Chairman and Ex-Members of Kaski, Syangja, Banke, Bardiya, Morang, Jhapa, Kavre and Lalitpur DDCs and the officials particularly, the LDO/chief executive of the DDC, Planning, Finance, Internal Audit Section chiefs have been very supportive to the study team in sharing their own perception on ADDCN and also the role it should play in future. PRAD Nepal wishes to thank for their free and frank discussion and their suggestions for making ADDCN financially sustainable and effective in the years ahead. PRAD Nepal also acknowledges the suggestions provided by the donor community, government officials and NGOs working in the decentralization area. PRAD Nepal believes that the analysis and the recommendations made in the study will be very helpful to all those who have keen interest in decentralization in Nepal and who believes in a strong ADDCN. October 2006 PRAD Nepal

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Acronyms ACT Assessment Coordination Team ADDCN Association of District Development Committee of Nepal AEPC Alternate Energy Promotion Centre CBOs Community Based Organizations CCO Canadian Co-operation Office DANIDA Danish Assistance for International Development DAP District Annual Plan DASU Decentralization Advisory Support Unit DDCs District Development Committees DDF District Development Fund DFDP Decentralized Financing Development Program DFID Department for International Development/UK DIDC District Information and Documentation Center DIMC Decentralization Implementation Monitoring Committee GTZ German Technical Cooperation HRD Human Resource Development HUGOU Human Rights and Good Governance Advisory Unit IAS Internal Audit Section IGD Institute for Good Governance and Development INLOGOS Institute of Local Governance Studies LAN Local Area Network LBFC Local Body Fiscal Commission LBs Local Bodies LDO Local Development Officer LGSP Local Government Support Program LMs Line Ministries LSGA Local Self-Governance Act MoLD Ministry of Local Development MuAN Municipality Association of Nepal NAVIN National Association of VDC in Nepal NGO Non-Governmental Organization NIEC National Informal Education Committees NPC National Planning Commission PAF Poverty Alleviation Fund PRAD Policy Research and Development RAP Rural Access Program REDP Rural Energy Development Program REP Renewable Energy Project RUPP Rural Urban Partnership Program RWSSFB Rural Water Supply & Sanitation Fund Board SNG Sub-National Governments (DDC, Municipality and VDC) UCLG United Cities of Local Government UDLE Urban Development through Local Efforts UNDP United Nations Development Fund USAID United States Agency for International Development VDC Village Development Committee VDF Village Development Fund

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EXECUTIVE SUMMARY Introduction and Methodology It has been more than 10 years that ADDCN was established. The functioning of the Association was guided by its vision, goal and objectives. Expected outputs have been specified and corresponding strategies and broad activities identified. In the light of this a performance assessment of the Association documenting the attainment of strategic goals and outputs set has been felt essential. Such assessment is expected to document its strengths and identify its weakness and suggest measures for its further developments. The overall objective of the evaluation is to review the activities carried out by ADDCN since its inception in 1995 in attaining the vision, goal and objectives in the sprite of the statute of ADDCN. The specific objectives, however, are as follows:

• to assess the overall past achievements of ADDCN in promoting decentralization and local self-governance and good governance at local level;

• to appraise the financial sustainability of ADDCN and recommend appropriate strategies; and

• to analyze present political condition vis-à-vis ADDCN strategy and recommend for immediate and short term strategy of donor support to ADDCN

The present assignment adopted various study approaches. Major approaches include desk study, interactions/discussion, and pilot survey and debriefing meeting. Desk study approach involved collection and screening of all relevant documents and literatures. How stakeholders perceive ADDCN’s contributions in different spheres is essential to understand. A rapid appraisal of stakeholders has been made by soliciting their views about ADDCN and the role it has performed in strengthening the decentralized governance system. SWOT analysis has been attempted to identify ADDCN’s strengths, weaknesses, opportunities that ADDCN enjoy and the possible threats it may have to confront in future. A sustainability analysis of ADDCN has also been carried out to recommend measures for the sustainability of ADDCN. The assessment used both primary as well as secondary data for analysis. Secondary data were gathered from published and unpublished documents and official records of the Association, mainly the annual progress reports. The primary data were gathered through pilot survey of 8 DDCs and focused interaction meetings with key stakeholders. DDCs of Jhapa, Morang, Kavre, Lalitpur, Syangja, Kaski, Banke and Bardiya district were selected for pilot field survey. Check list and semi-structured/structured questionnaire were developed and used for soliciting views and perceptions of former elected representatives of the sampled DDCs and major stakeholders. Log Frame approach, Stake Holders Analysis, SWOT analysis and sustainability analysis were the major tools used for assessing the performance of ADDCN. ADDCN has set three important outputs, developed strategies and identified activities to attain those outputs. The present study captures those outputs and activities associated with each output to assess the performance of ADDCN.

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Status of Achievement

Output One: Ability to influence national policy and to represent the interest of DDC enhanced

Activities accomplished It has strongly lobbied and advocated on issues relating to decentralization and

local governance. The contribution of ADDCN in the enactment of LSGA 1999 and Regulation and

subsequent amendments has been widely acclaimed. 23 contradictory Acts were identified and lobbied strongly for its amendment.

ADDCN contributed significantly in reaching an agreement on the block grant allocation formula to DDCs and mediated in resolving the dispute on revenue sharing from Kali Gandaki hydro power generation.

ADDCN strongly lobbied to put the agenda of fiscal decentralization in the forefront resulting to the formation of a permanent Local Bodies Fiscal Commission (LBFC) in 2002 and ADDCN became one of the members of the steering committee.

ADDCN represented in the steering committee and the task force of the. GoN lead multi donor Local Government Support Program (LGSP), aimed at enhancing the institutional capacity of LBs. Its representation in the steering committee and task force has been instrumental in influencing the capacity building areas of DDCs.

Effectively represented DDCs in various high level policy making bodies such as the National Development Council (NDC), Decentralization Implementation and Monitoring Committee (DIMC). It has also played an active role in the preparation of Poverty Reduction Strategy Paper (PRSP), the Tenth Plan and in Local Bodies Fiscal Commission.

Built partnerships with various stakeholders and collaborated with bilateral and multi-lateral donors and international NGOs. ADDCN’s agreement with the Decentralization Advisory Support Unit (DASU) in 1998 under Danida was a milestone in strengthening overall institutional capacity of ADDCN and to provide strategic services to its member DDCs.

More recently, ADDCN prepared a proposal on local governance to be provisioned in the interim constitution. Concept paper on restructuring of LBs has been prepared and disseminated.

Promote issues related to social development focused on children, women disadvantaged groups and poor; mobilized network in raising public health awareness and supporting national program of immunization, polio, vitamin A, and leprosy program

Strengthened gender subcommittee & developed working guidelines, established gender forum; collaborated & coordinated with different stakeholders for implementing Gender Mainstreaming Guidelines

On the whole ADDCN’s ability to influence national policy and represent the interest of DDCs has significantly enhanced.

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Output Two: Institutional capacity of ADDCN strengthened Activities Accomplished

ADDCN, over a period of time, has strengthened its institutional capacity for service delivery. ADDCN from an organization with few staff has grown into a bigger organization. 10 professional staffs were recruited. This has greatly assisted in the ability of the organization to move ahead toward its strategic plan. ADDCN has introduced a job performance appraisal system and thus a scientific evaluation system has been developed.

ADDCN reached an agreement with NALAD for five years. This agreement has helped ADDCN staffs to further broaden their knowledge and experience.

Exposure visit of Denmark to Executive Committee members and professional staffs were arranged. Such visit has given international exposure and has enhanced the understanding of the members and staffs.

ADDCN has prepared its strategic business plan. This has followed the preparation of internal working guidelines of each Unit. Code of conduct for office bearers and staffs of the Association has been prepared. It has also prepared model code of conduct for LG representatives and model citizen charter.

ADDCN has experienced an improvement in international communication through networking with intranet, internet and email. Documentation center has been established and upgraded. Now and documents and can be searched electronically.

ADDCN has developed its own website and updated periodically. It has developed HRD policy’; developed manuals for financial management; prepared

TOT manual and training organized; established MIS & database system at the Secretariat; new accounting system introduced.

Prepared manual on transparency and accountability.

Output Three: Ability to provide appropriate response and timely service increased

Activities Accomplished

ADDCN since its formation has been providing technical advice, training, visits and other support services to member DDCs. As a result of this it has been reported that DDCs planning and management capabilities has enhanced.

ADDCN has been providing technical service to DDC in the preparation of DPP. It has assisted 28 DDCs in their DPP planning exercise. Thus, the competency of ADDCN to provide technical support in the preparation of DPP has been greatly enhanced.

It has also helped in preparing the strategic plan of 28 DDCs. ADDCN has assisted DDCs in the institutionalization of District Information and Documentation Center (DIDC).

ADDCN has played an instrumental role in forming DDF & Internal Audit Section (IAS); IAS has been established in 67 DDC and ADDCN has provided training and refresher training to IAS staff. Internal Audit Manual has been prepared and updated.

A handbook of renewal energy for local government, code of conduct for LBs. representatives has been prepared.

ADDCN has successfully completed “revenue potential study in two districts. The study findings are expected to provide a framework for enhancing internal revenue generation for all DDCs.

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ADDCN has also facilitated to prepare two years capacity development plan of 20 DFDP program districts.

On the whole ADDCN's ability to provide timely services to its member DDCs has increased. Performance of ADDCN: Stakeholders' Perspective A mixed reaction has been expressed from various stakeholders regarding the performance of ADDCN. Former elected representatives from the surveyed districts and officials and donors community unequivocally appreciated the role performed by ADDCN in consolidating the process of decentralization and local governance in Nepal. They gave credit to ADDCN for the enactment of LSGA and R/R. Developing training manuals, guidelines and providing training as well technical support has helped in enhancing the institutional capacity of member DDCs. They further noted that the absence of elected body at the DDC caused a little gap in the relationship between ADDCN and DDCs. All the donors interacted during the study consistently raised the issue of its legitimacy. ADDCN is a political body so it is difficult to keep it away from the belief/policy of political party. It has been suggested that the Chairperson and the Executive Committee members should leave behind the political ideology and party politics and devote themselves for the cause of the organization. Dissatisfaction has been expressed relating to the activity in the board and committee where ADDCN has representation. It has been noted that ADDCN bi-passed totally the DDCs they represent. It has also been observed that ADDCN lacks retention policy of the existing staffs which has resulted in the dearth of experienced manpower. Some of the stakeholders observed that the three LG Associations be amalgamated and replaced with a much stronger single local government association. ADDCN has been blamed as being more a political body than institutional one. That is why its delivery part has remained very poor. It was further observed that in the sphere of devolution of services ADDCN could not perform satisfactorily. ADDCN’s performance in strengthening transparency and accountability of Local Government has been very noteworthy. MUAN and NAVIN admitted having a very cordial relation with ADDCN. LB Central Coordination Committee has been formed to act collectively on areas of common interest like local autonomy, decentralization and devolution. Both the associations were very critical with the capacity building activities of ADDCN that focus only to DDCs. They further observed the faulty approach of Donors to patronize ADDCN alone. Many stakeholders raised the issue of the reinstatement of the LBs. They recommended that in the absence of this the government should come out with some interim arrangement with all party representation so that congenial atmosphere could be created and ADDCN could move ahead towards its strategic business plan. ADDCN lack strong legal base. It does not have its own act rather registered under the National Directive Acts 1961. This makes the organization difficult to grow.

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SWOT ANALYSIS

Strengths Strength lies in making the both the Council and Executive Committee as

inclusive. To make a mandatory arrangement of at least one female member from each DDC in the Council should be considered as its strengths. This will ensure the interest of women development and empowerment.

ADDCN has established the tradition of offering the seat of Vice-chairpersonship to a Council members belonging to a party that has second largest majority in DDCs. These provisions have made ADDCN as inclusive institutions having representation of all political parties.

It is a representative, collective institutions of all 75 DDCs which are its institutional members.

ADDCN has been established as a responsible institution advocating the need for decentralized democratic governance system in the country. Has gained and build up knowledge in the matter of decentralization and local governance.

Government of Nepal has been fully committed to decentralization and accordingly moving ahead toward full scale devolution of some essential services.

Institutional recognition at national, sub-national and international level. Such recognition could be used to further strengthen its existence and effectively represent DDCs interests.

It has established its institutional network and linkages with many agencies inside and outside the country as well. ADDCN is the member of United Cities of Local Government (UCLG).

Weakness

ADDCN is registered under the National Directives Act 1961; lacks its own Act Many member DDCs have not paid their membership fee regularly. ADDCN does

not posses any right to penalize the DDCs who have not paid their membership fee.

It has been acting more as a political rather than a professional institution. Very large Council with 300 members. Too big professional structure causing high financial overhead Weak resource base and inadequate financial resource mobilization Lack of implementation of the action plan associated with its strategic business

plan DDC lacked to fully own the full scale devolution plan of the government. Too much dependency in one donor failing to diversify its network with other

donors. Opportunities

ADDCN, through other two local bodies association, could strongly lobby and advocate on democratic decentralized governance system. The success of the enactment of LSGA and Regulations has created a positive public image for ADDCN.

Many member DDCs perceive that due to the amendment/reformulation of the financial regulation, the resource base of the DDC has widened.

Decentralization and good governance has been the major agenda of many donor countries. In this context ADDCN has a tremendous scope to coordinate with

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donor agencies Collective voice of all three local bodies associations through Local Bodies

Association Coordination Committee. There is decentralization supportive policy environment. Government has already

shown its commitment by piloting the full scale devolution in 14 districts of the country. ADDCN has the opportunity in this area to make the full scale devolution a successful venture.

Drafting of new LSGA in accordance with the much discussed new structure of the state opens up opportunity to ADDCN to work for sound legal framework for democratic local governance.

Threats

Political uncertainties and unclear government structure resulting from second peoples movement

Conflicting Acts with LSGA have not been amended, DIP has not been fully implemented, DIMC not fully functional and LBFC is not very active.

Lack of short and long term sustainability plan Lack of elected representatives raising the issue of legitimacy of the Association Lack of retention plan of professional manpower Withdrawal of donor support after the expiry of the tenure of elected representative

at local government/DDCs

Financial Sustainability of ADDCN The performance of ADDCN in the matter of raising of revenue from internal sources is not up to the mark. ADDCN has fixed a three tier system of levying membership fee on the basis of DDCs annual income. This provision lacks equity and justice. Moreover, the fee contribution is not regular and it seems that ADDCN too has never been serious in collecting revenue from this source. Large number of DDCs are noticed not contributing membership fee especially after the termination of elected body in DDCs. Similarly, the service charge and the volume it collects is too low and therefore, never been regarded as an important source of revenue for ADDCN. ADDCN is found heavily dependent upon external support since its inception. DASU/DANIDA has been the major financier of ADDCN. The grant money provided by DASU/DANIDA shared as much as 59 percent of the total expenditure of ADDCN. The internal revenue of the ADDCN is being put to a severe pressure after the discontinuance of financing by DASU/DANIDA. The internal revenue and savings of ADDCN can not sustain such a pressure for a long period. ADDCN’s Unfinished Agenda There are some unfinished activities that ADDCN should have to continue. The completion of these activities is expected to help achieve the envisioned outputs of ADDCN.

ADDCN strongly lobbied for the formation of DIDC in each DDC. It has prepared a working manual to strengthen DIDC and the manual has been piloted in Morang and Kaski. It has been found very successful and need to replicate in all the districts. the completion of this project in all 75 DDCs is expected to strengthen DIDC in all the districts.

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ADDCN has prepared IAS training manual. 55 DDCs IAS officers have been trained so far. 20 more DDCs are yet to be covered. One of the unfinished agenda of ADDCN is to expand this service on remaining 20 DDCs. It has now been realized that in order to create a conducive environment and the cordial relationship between Accountant and Internal Auditor the training should also be provided to the accountant as well.

Natural Resources, Energy and Environment (NaREE) Unit provides professional services on natural resources, energy, environment management and planning and implementation of rural energy system and environment initiatives at local level. Given the support available the Unit could further effectively serve the DDCs in the matter of natural resources, energy and environment management.

SOME KEY ISSUES AND DONOR SUPPORT Key Issues 1. Financial Sustainability ADDCN is facing big challenges of its sustainability. The revenue base is too small and more over it is too uncertain. A heavy dependence on the external donor support has posed a threat in its survival. Following issues on financial sustainability are worth mentioning:

Historically, ADDCN has been placing less importance to internal resource mobilization;

Over dependency on donor support; Expansion of activities without properly assessing their importance to

Organizations objectives; Creation of staff position without proper justification; and Lack of vision on the long term sustainability plan

Suggestive Measures for the Sustainability of ADDCN A. Scaling down and rationalizing ADDCN activities

In view of the discontinuance of DASU financial support, ADDCN is put in a precarious situation wherein scaling down of the present level of activities and rationalizing it appears to be the only plausible solution and logical option before it. B. Rationalizing staff positions to reduce the fixed cost burden

After the discontinuance of DASU's financial support, challenges lie ahead to make ADDCN financially sustainable and viable. ADDCN should seriously exercise on rationalizing the existing organogram and staff positions. Outsourcing of service currently being performed by the ADDCN permanent staffs could be another option. C. Augmenting internal revenue base and sources

Avenues should be explored to find more secured internal resources. It should be kept in mind that such internal resource base should be as broaden as possible. The broad resource base will, on the one hand, make the resources predictable with less vulnerability.

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D. Revision of the rates of membership fee

There is a scope for revising the existing membership fees. The membership fee appears to be unjust and unfair to the DDCs just crossing the threshold of annual revenue of Rs. 5 million as compared to the DDCs earning many times more. The rate should be so revised so as to make it fair and just. E. Enhancing level of contribution from projects/programs

Lower level of saving from the undertaking of projects/programs is yet another issue ADDCN should conduct surveys and studies to determine the margin of saving which similar other agencies are able to secure from such activities. Based on findings and results of such surveys and studies, ADDCN should take appropriate policy decisions and procedural measures to ensure that the agency enjoys the benefit of reasonable return out of the projects/programs undertaken by it. F. Support from the government and member DDCs

It is necessary that the member DDC and the government come forward and contribute for ADDCN's financial sustainability. Member DDCs can agree to share an agreed percentage of it's own source revenue, shared revenue and the unconditional grants it receive annually from the government. Government, on the other can provide an annual grant to ADDCN for the services it provides in strengthening decentralization and may also transfer the budgetary provision of DDC level training etc.,

Some other noteworthy areas of resource mobilization to be explored are:

• Share a fixed % (say ½ to 1 %) of DDC internal revenue • Share 1 % of unconditional grants to DDC • Share fixed % of hydro power, forestry or tourism income etc. • Membership fee hiked in proportion to revenue • Asking government to provide all LBs training budget, coordinate training-

training fee as source of revenue • Other fees, study etc.

2. Political neutrality The credibility of the Association lies on making politically impartial decisions. In recent year, some members of the association as well as the stakeholders including the donor community are under the impression that ADDCN has failed to remain politically neutral. This is definitely not a very encouraging sign. To overcome this problem, it is desirable that the association in its activities and stand on issues reflect political neutrality. 3. Relationship with member DDCs ADDCN, as of now, is projecting itself as a club of the politically elected DDC representative. The annual convention of the 300 member council is the only occasion when a member DDC can ventilate its problems and issues. There is no provision of a technical level committee between ADDCN and member DDCs that ensure institutional relationship between the two. This has created a big gap between the two specially since 2002, when the terms of the elected members at the DDCs had expired. This calls for appropriate changes in the existing ADDCN constitution to provide room for strengthening institutional relationships between the two institutions.

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Activities carried out by ADDCN for its member DDCs have also gone down significantly over these years. These examples clearly show that with the expiry of the elected personnel in DDC the relationship between ADDCN and its member DDCs has gone down sharply. This justifies a need for technical level relationship between the two. 4. Ambiguity in Donor policy ADDCN has remained dependent on donor support. It received large amount of support, both hardware and software. This has really helped in enhancing capability of ADDCN. Lately, donors have also raised voice against the seemingly politically biased attitude of ADDCN in its functioning. But, the action of the donor community was quite contrary. Most of the donors stopped its support sighting absence of elected leadership. This has created big problem in retaining the professionals and other trained manpower at ADDCN and as a result, it has lost a number of trained manpower in the last few years. It should be noted that a professionally strong ADDCN can take stand in making decision that are politically neutral. Therefore, it is strongly recommended that a rethinking in stopping donor support, citing absence of elected political leadership, be made and the support to ADDCN continued so that the institution could be strengthen professionally. 5. Future Structure of ADDCN Nepal is now in a great transition phase. With the new constitution in the offing, the overall governance system is undergoing a massive change. At this point of time, it is difficult to pinpoint the kind of governance system Nepal soon will have. A change in the present governance structure may result ADDCN redundant and as an alternative, a more comprehensive and wider scoped "Local Government Association" might emerge. Such transformation in Local Government Association will not only increase it's scope of work but will also increase the size of it's resource base. There seems to be two schools of thought on the future governance structure; one favoring federal structure and another non-federal unitary system. Uncertainty in the governance structure has been a matter of serious concern to ADDCN Conclusion and Recommendations A decade of ADDCN activities in Nepal and elsewhere, clearly demonstrated that local government associations are of crucial importance to the development of a viable local government system and as a development partner for the central government in the decentralization process. It is seen that local government associations can: (i) promote and contribute to the decentralization process, e.g. by linking central government, local governments, donors and other actors; (ii) facilitate co-operation and dialogue between central government and local governments; (iii) represent local government interests vis-à-vis the central government; (iv) support institutional and capacity building in the local government sector. ADDCN, with a variety of activities ranging from contribution in drafting LSGA and Regulation to lobbying for creating institution that help decentralization process and capability development at DDCs. has been very successful in contributing the above mentioned widely believed agenda. In order to fulfill the current tasks satisfactorily and to facilitate further devolution of task, it is necessary to upgrade it's capacity to:

a. Co-ordinate DDC activities and inter-DDC initiatives; b. Facilitate exchange of experience of best practices among local governments;

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c. Gather and distribute important information to local governments; and d. Formulate a new local governance legislation in accordance with the upcoming

new state structure

ADDCN has been receiving a sizable assistance from donors since its very inception With scanty resource but an ambitious mandate for rapid decentralization through awareness creation among political party and policy makers, supporting member DDC capacity enhancement and internationalizing Nepalese decentralization, ADDCN readily accepted the support primarily from DASU/Danida. The support continued till 2005 and with such a generous support ADDCN could establish itself as a professionally sound and strong institution devoting itself for the cause of decentralization in Nepal. Upon the completion of (DASU)/DANIDA project a new MOU was signed between Danida HUGOU and ADDCN. Under this arrangement financial support to ADDCN was provided till July 2006 to maintain the current institutional strength of ADDCN to achieve its vision and goal and to support continuity to its ongoing activities. The discontinuation of Danida assistance has actually landed ADDCN in a financial crisis. It has already lost some of it's trained manpower and now there are only three professionals working at present. Although ADDCN developed its strategic plan in 2001 it could not, however, make its retention policy very attractive. Therefore, the association needs an immediate rescue package that may include both immediate to short term as well as long-term packages. The immediate to short term package should contain at least the following;

a. Support to retain the professionals and the key core staff; b. Support for office supplies and the logistics; c. Support for the replacement of some office equipments (there should be a plan to

completely replace /add office equipments over a period of time); d. Continuation of some unfinished tasks, such as, training of all internal auditors in

the DDCs, training financial management, implementation of MIS system and training of personnel and carry out natural resource and environmental activities;

e. Developing uniform financial regulation vis – a - vis that of government (the differences in the regulation is creating lot of problems at the DDC level), developing monitoring indicators on finance, project selection, prioritization and implementation – DFDP indicators may be used but training of personnel will be required ;

f. Conducting seminar and workshop on contemporary issues; g. Commence studies for exploring the possibility of financial contribution by

member DDCs and the government, and develop a modality to achieve ADDCN's financial sustainability;

h. Support to a study on restructuring of LGs (size of DDC, municipality and VDCs, an its political boundary etc); and

i. Support to a study on the role of local body and the way forward in decentralization in a federal system in Nepal – including the pros and cons and the strategy to mitigate the cons

Medium to long term support package should focus more on the institutional strengthening of the association and therefore, should at least contain;

a) A support package for human resource development, both within ADDCN and it's member DDCs.

b) Study program in better performing DDC and overseas, exposure programs of officials as well as elected members;

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c) Strategic development plans of DDCs; d) Co-operation and negotiation with the central government and other partners; e) Resource mobilization and resource sharing of common properties such as,

hydropower, forestry, tourism, national parks and wild life sanctuary etc; f) Drafting of necessary act and regulation providing legal base for efficiently

carrying out the autonomous function by DDC; g) Feasibility of creating a Local Government Association replacing all three

association and drafting of its constitution, rules and regulation etc

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CHAPTER ONE

INTRODUCTION

1.1 Background Decentralization of governance in Nepal began in 1960s. Since then the process has undergone significant changes over time. Post 1990s period may be considered as the landmark in the development of decentralization process in the country. The Constitution of the Kingdom of Nepal of 1990 has incorporated decentralization into the directive of the state policy, which clearly states "the State shall maintain conditions suitable to the enjoyment of the fruits of democracy through wider participation of the people in the governance of the country and by way of decentralization”. In March 1992 the first elected government promulgated three separate local governments Acts: District Development Committee Act; Municipality Act and Village Development Committee Act. Subsequently, the election of local bodies was held in 1993. Limitations in the Acts resulted subsequently in bringing out another unified act viz., Local Self Governance Act (LSGA) in 1999. The promulgation of this Act provided the regulatory framework for decentralized local governance in the country. The Act has been a means to pave way for eventual devolution of state authority to Local Government in accordance with subsidiary principle of governance. There is a two tier local government system in the country. The lower level consists of village development committee (VDCs) and Municipalities. The second tier consists of District Development Committees (DDCs). There are 3913 VDCs, 58 municipalities and 75 DDCs in the country. DDCs are aggregate institutions of village and Municipality Governments in district level. Their main function is to coordinate the development initiatives of entire district as district governments. After the promulgation of local governments Acts the election was held in 1993 and the local government was formed. The local governments so formed felt a need for representative association which would put collective pressure on the government and other actors on their behalf and acts as facilitators and intermediary institutions. Such needs resulted in the formation of ADDCN in 1995. The need was also strongly felt to help empower the DDCs with capacity building and strengthening to undertake the people centered development activities by providing professional inputs and guidance on a regular basis. 1.2 Rationale of the study It has been more than 10 years that ADDCN was established. The functioning of the Association was guided by its vision, goal and objectives. Outputs were specified and corresponding strategies and broad activities identified. In the light of this a performance assessment of the Association documenting the attainment of strategic goals and outputs set has been felt essential. Such assessment is expected to document its strengths and identify its weakness and suggest measures for its further developments. The proposed study is toward this direction. 1.3 Objectives of the Evaluation The overall objective of the evaluation is to review the activities carried out by ADDCN

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since its inception in 1995 in attaining the vision, goal and objectives in the sprite of the statute of ADDCN. The specific objectives, however, are as follows:

• to assess the overall past achievements of ADDCN in promoting decentralization and local self-governance and good governance at local level;

• to appraise the financial sustainability of ADDCN and recommend appropriate strategies; and

• to analyze present political condition vis-à-vis ADDCN strategy and recommend for immediate and short term strategy of donor support to ADDCN

1.4 Scope of Work The scopes of works of the proposed study, as specified in the TOR, are as follows:

• to assess the role of ADDCN as representative organization of Local Governments (LG) in Nepal;

• to assess ADDCN’s role in decentralization reform process after the restoration of democracy in the country;

• to assess the institutional capability of ADDCN to achieve its vision, objectives, strategies and outputs;

• to assess the effectiveness of ADDCN in participation and representation in decentralization reform process;

• to assess effectiveness in terms of providing its services to members and LGs; • to assess the status of and achievements according to the strategic plan of ADDCN

prepared in 2001; • to assess the current need of ADDCN in institutional building, policy influence and

service delivery; and • to provide futuristic (immediate and short term ) outline to ADDCN in post

conflict scenario and pushing its agenda for decentralization reform and local democracy promotion

1.5 Study Methodology The present assignment adopted various study approaches. Major approaches include desk study, interactions/discussion, and pilot survey and debriefing meeting. a. Desk Study Desk study approach involved collection and screening of all relevant documents and literatures as listed in the TOR. This approach focused on the detailed review of relevant documents like ADDCN’s statute, bylaws, and regulations. Likewise, annual progress reports of various years and strategic plan of ADDCN are thoroughly reviewed. Besides, other regular publications of ADDCN were also reviewed. b. Stakeholders’ Perspectives ADDCN has a number of key stakeholders. DDCs, Municipalities, VDCs, LG Associations (MUAN & NAVIN), Government of Nepal, NPC are its key stakeholders. How stakeholders perceive ADDCN’s contributions in different spheres is essential to understand. Therefore, a rapid appraisal of stakeholders has been made by soliciting their views about ADDCN and the role it has performed in strengthening the decentralized governance system. c. Internal Analysis

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ADDCN is yet to develop as a strong and professional organization structure and capacity to deliver its core services effectively. Developing a strong organization of ADDCN would be a critical input for implementing its strategies and programs. Hence, the analysis of ADDCN’s organizational structure, system and process has been carried out to reflect its internal system as a whole. Such exercise has enabled to highlight the problems in the existing structure and suggestive measures for streamlining the organization structure.

d. SWOT Analysis Attempt has also been made to carryout SWOT analysis. This analysis is expected to identify ADDCN’s own strengths, and weaknesses. Further it will also examine the opportunities that ADDCN enjoy and the possible threats it may have to confront in future. e. Sustainability Analysis A sustainability analysis of ADDCN has also been carried out. This analysis comes out with policy recommendations the adherence of which could make ADDCN institutionally and financially sustainable.

1.5.1 Data Collection Methods The assessment used both primary as well as secondary data for analysis. Data were gathered in following ways:

Secondary Data Collection The study required quantitative data on the physical achievements of the Association. These data were obtained from the published or unpublished documents and official records of the Association, mainly the annual progress reports.

Primary Data Collection The performance assessment also required collection of data from the field level. Both quantitative and qualitative method of data collection techniques was adopted. Former elected DDC officials who were involved in seeking guidance and professional support from ADDCN in various spheres of DDC activities was interacted and interviewed. Furthermore, the LDO and section/division in charge were also interviewed to obtain their views and perceptions on the activities of ADDCN.

Interaction/Consultation Meeting Focused interaction meetings and discussion with the key stakeholders and ADDCN partners was carried out. They include relevant line ministries including Ministry of Finance (MoF), Ministry of Local Development (MoLD) and National Planning Commission (NPC). Consultation meetings were also held with the representatives of bilateral and multilateral donors like Danida HUGOU, UNDP, USAID, DFDP, SNV, and Local Government (LG) Associations (MuAN, NAVIN) actively involved in the field of decentralization reforms and good governance. Likewise, interaction meetings were also held with PAF, AEPC and REDP. The consultation meeting focused on seeking views on the activities of ADDCN and its future role in strengthening the process of decentralization and local governance in the country. Discussions were also held with the NGOs like IGD and INLOGOS involved in the area of decentralization and governance.

Debriefing Meeting

A debriefing meeting was organized where key findings of the study was presented. The

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study team received valuable comments and suggestions from the participants. The comments and suggestions have been duly incorporated in this final report. 1.5.2 Field Visits In order to seek the views of former elected DDC officials and currently officiating Local Development Officer on the performance of ADDCN field visits were made. Though in the proposal we proposed to cover 5 District Development Committees (DDCs) considering the seriousness of the assessment we visited 8 DDC representing ecological and development region. In view of the limited days assigned for field visits we were forced to select accessible DDCs. Such selection process may result in the methodological bias. Nevertheless, such selection procedure would not significantly affect the outcome of the assessment. We selected Jhapa, Kavre, Lalitpur, Syangja and Bardiya DDCs. In the case of few selected DDCs some adjoining DDCs were also visited. For example in the process of covering Syangja DDC, Kaski DDC was also covered. Likewise, Banke and Morang DDC were also visited. Thus altogether 8 DDCs were covered. A group interaction meeting was organized in the selected DDCs to seek the views of all section officials about ADDCN and its activities. In the interaction meeting of all the selected DDCs, former elected President, vice President and few members participated the meeting. 1.5.3 Tools for Investigation Check list and semi- structured/structured questionnaire were developed and used for soliciting views and perceptions of stakeholders. Different sets of checklist were developed to facilitate consultation meeting with different stakeholders (See Annex 1.1). For field visits separate questionnaire (semi structured/structured) was prepared to administer to former DDC officials and currently officiating LDO. Comments and suggestions were solicited from the Assessment Coordination Team (ACT) and accordingly a final checklist and questionnaire was prepared. 1.6 Analytical Approach A Log Frame approach has been used to assess the task and performances of ADDCN during the study period. As per the frame-work, objective, task and activities to be covered by ADDCN were laid out in detail and the performance, in terms of completion of tasks and activities have been documented. Besides, a Stake Holders Analysis was carried out to understand the perceptions of various stake holders on the performance of ADDCN. The stake-holder's analysis thus complemented the Log-frame analysis of its actual performances of tasks and function as stipulated by it or as per the agreement with the donors. Internal Analysis of ADDCN has also been made to examine the strengths and weakness of the existing organization structure. A short and long term sustainability plan of ADDCN has been suggested through sustainability analysis. Strengths, weaknesses, opportunities and threats (SWOT) analysis has been carried out to examine the strength and weaknesses of ADDCN in delivering the mandated/agreed tasks and functions. 1.7 Study Limitation Although, the evaluation is based on sample of some districts and the stakeholders plus the information supplied by ADDCN, the exclusion of districts and the former elected officials in the inaccessible districts limits information as to how far ADDCN has been effective in strengthening the remote DDCs. Such information would have provided a

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clear picture on what should be the role of ADDCN in strengthening such DDCs and the modality of support best suitable and effective in these districts. The study was carried out in the backdrop of a major political change in the country. New constitutional process has began and the issue of state restructuring has been the major political agenda of the political parties including Maoist. As such, there is an expectation that the governance structure in the country is bound to change. While some are arguing in favour of federal type of government others are talking about reduction in the number of DDCs with more authority and power to carry out development function (including judiciary and law and order function devolved to local level) and resource mobilization etc. Because of the non-clarity on the future governance system in the country, the report could not suggest explicit structure for LG Associations in future. Although, recommendation have been made to consider the possibility of a Local Body Association merging all three separate local body association. 1.8 Organization of the study report The study is organized in eight chapters. Chapter I brief about the rationale of the study, the objective of the evaluation and it’s scope as well as the analytical approach and methodology followed in the study. An overview of ADDCN has been presented in Chapter II. This is followed by Chapter III which evaluates the performances of ADDCN based on its vision, objectives and the activities carried out since its inception. A Log frame approach as well as the SWOT analysis was carried out to evaluate its actual performances. Chapter IV highlights the result of the field discussion and the response of different stakeholders on the performances of ADDCN as well as the key issues confronting including financial sustainability and it’s role in the changing political situation. Chapter V focuses on the strengths, weakness, opportunities and threats (SWOT) of ADDCN. Chapter VI examines the income, expenditures patterns of ADDCN and the donor support. Based on its present financial situation and its potential future role it suggests alternate revenue source and expenditure cut down to maintain financial sustainability. The chapter also suggests strategy for foreign assistance. The last Chapter VII discusses about some of the critical issues confronting ADDCN and the way out to resolve it. This chapter also summarizes the report with some concrete recommendations.

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CHAPTER TWO

ASSOCIATION OF DISTRICT DEVELOPMENT COMMITTEES OF NEPAL: AN OVERVIEW

2.1 Introduction to ADDCN The Association of District Development Committee of Nepal (ADDCN) was established in 1995 as an umbrella organization to represent and provide support to all 75 DDCs. ADDCN has been registered under the National Directives Act 1961 with the approval of cabinet. All DDCs are its institutional members. ADDCN has a Council, an Executive Committee and a Secretariat which is based in Kathmandu. The Executive Committee is the decision making authority and the Secretariat is the implementing body. The Statute of ADDCN was adopted in BS 2052 (1995) and subsequently Working Procedure Regulations BS 2054, Financial Regulations BS 2054 and Electoral Procedure Regulations BS 2054 was adopted. Accordingly, ADDCN developed its vision, goal and objectives. 2.2 Vision and Goal According to its Constitution the vision and goal of ADDCN are:

VISION “ To institutionalize decentralized local self-governance and people centered development process in Nepal that can adequately and effectively respond to the needs preferences and aspirations of common people from the perspectives of need based participatory, people –owned/sustained development”

GOAL “To build institutional and human capabilities of all local governments to work towards the attainment of the vision”

2.3 Objectives ADDCN has set following objectives as guidelines so that its stated vision and goals could be achieved: • Promote activities that aim at increased participatory self governance and

development in accordance with the spirit of pluralist democracy, decentralization and humane governance;

• Disseminate and keep both the government and parliament informed on district development initiatives and DDC activities;

• Facilitate the process of sustained development at district levels based on people’s participation;

• Strengthen the capacities of DDCs through information advisory, training, technical and professional supports and services;

• Establish District Development Fund for enhancing the resource base of DDCs and • Establish linkages and sisterhood relations with likeminded national as well as

international institutions and also make them familiar with and seek support for the decentralization efforts in Nepal

2.4 Output and Strategies Considering the vision and goal statement stated above three outputs are proposed. ADDCN formulated a strategic plan in 2001. Expected outputs along with strategies adopted are as follows:

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Institutional capacity of ADDCN strengthened; Ability to influence national policy and to represent the interest of DDC enhanced;

and Ability to provide appropriate response and timely service increased.

The following are some major strategies of ADDCN: Strategy 1. Advocate and put pressure for decentralization and local self-governance; Strategy 2. Research, publication and documentation/information network on decentralization, local governance and participatory development; Strategy 3. Build capacity of DDCs for enhancing institutional vis-à-vis planning and service delivery capabilities; Strategy 4. Promote issues related to social development focused on children, women

disadvantaged groups and poor; Strategy 5. Establish continued partnership with like minded institutions at national and

international level in accordance with the vision, goals and objectives of the institutions; and

Strategy 6. Represent local government interests in national, sub-national and local level. 2.5 Organizational Structure of ADDCN The organizational structure of ADDCN can be classified into two categories. One is political structure comprising Council and the Executive Committee. Another one is the professional structure that comprises Secretariat.

2.5.1 The Council The organization structure of ADDCN has the Council as its supreme body. It comprises of 300 members, four from each district. Chairperson, Vice-chairperson and two members of the DDC from each district represent the Council. Among the two members one should essentially be a women member. The Council elects officials of the Executive Committee for tenure of two and half years. The Council meets once a year. 2.5.2 The Executive Committee The Executive Committee is a 23 member committee consisting of a Chairperson, and Vice-chairperson, 15 elected members and 6 nominated members from the elected body. Chairperson and Vice-chairperson are elected by the Council members. Members of the committee are elected on regional basis, three from each five development region. The 6 members are nominated by the elected body in such a way that DDC leaders belonging to various minority political parties and women are included. ADDCN has established tradition of offering the seat of Vice-chairpersonship to a DDC President belonging to party that has second largest majority in the DDCs. This has been considered as a very strong positive aspect in the formation of the Executive Committee.

2.5.3 The Secretariat The Constitution of ADDCN has made a provision of Secretariat headed by Executive Secretary General which is appointed by the Executive Committee. The Secretariat is based in Kathmandu. The Secretariat is responsible for all policy and institutional affairs

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of ADDCN. It has fulltime administrative and professional staff under the supervision of and guidance of the Executive Secretary General. In 2000 there were the provision of only five units namely: (i) fiscal management and administrative; (ii) information and advocacy; (iii) research and planning; (iv) decentralization promotion and (v) human resource development unit. In 2001 with a view of making the role of the secretariat more appropriate and timely the Decentralization Promotion unit was later restructured into Local governance Finance Unit, Legal Support Unit and Sectoral Services Unit reaching the total units to 7. and this was approved by the Executive Committee. In 2002 Natural Resources, Energy and Environment (NaREE) a new unit was added in the organogram of ADDCN reaching the total units to 8. The organogram of ADDCN is shown in Annex 2.1

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CHAPTER THREE

ADDCN: STATUS OF ACHIEVEMENTS

3.1 Background Before we venture on assessing the performance of ADDCN some events on chronological order that has affected its performance should be understood. In 1994 an ad-hoc committee was constituted to lead the process of the formation of the Association. With its first convention held in Biratnagar in April 1994 the Association was formally announced. Subsequently, ADDCN was formally registered in 1995 under the National Directives Act 1961.Between 1995 to 1998 all the efforts were geared towards lobbying and putting pressure to the government for the need of one single act of LBs. Accordingly, LSGA came into being in the year 1999. During the period 1999 to 2000 ADDCN focused its activities in assisting the government in the formulation of LSGR.ADDCN could effectively function for two years after the formulation of LSGR in 2000. ADDCN experienced a set back in July 2002 when the government decided not to extend the tenure of the LBs which was against the provision of the LSGA section 239. Owning to this political development in the country the legitimacy of ADDCN was being questioned and the ADDCN has to remain in low profile since then. In this backdrop we assess the performance of ADDCN.

3.2 Achievement Status After 10 years of its establishment ADDCN has been able to establish itself as reputable representative organizations of DDCs both within the country and abroad. It has emerged as leading institutions for the promotion of local self governance in the country. It has also grown into an active partner organization in the decentralization process and its further consolidation in the country. ADDCN has set three important outputs, developed strategies and activities were identified accordingly to attain those outputs. The present study captures following output associated activities to assess the performance of ADDCN. 3.2.1 OUTPUT ONE:

Ability to influence national policy and to represent the interest of DDC enhanced

a) Advocacy and pressure building to government The activities performed by ADDCN and the resultant output recorded shows that ADDCN has been able to maintain its credibility as a local bodies apex organization by playing a leading role in the decentralization process. At the central level it has played a noteworthy role through advocacy and other initiatives. It has strongly lobbied and advocated on issues relating to decentralization and local governance. At the district level, however, the political and security situation have posed problems for ADDCN and prohibited the wider development of services to its members. The contribution of ADDCN in the enactment of LSGA 1999 and Regulation has been widely acclaimed. The surveyed member DDCs, other LG Associations, stakeholders and donor agencies have appreciated the role performed by ADDCN in the enactment of LSGA and subsequent amendments in Rules and Regulations. Decentralization Promotion Unit, one of the units of ADDCN, has

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been actively engaged in this sphere. In fact as a result of ADDCN’s lobby some provisions of the Regulations have already been amended. By virtue of being a member of the LBFC ADDCN contributed significantly in reaching an agreement on the block grant allocation formula to DDCs. This formula was based on five indicators namely; HDI, population size, area, remoteness and revenue sharing. Furthermore, ADDCN’s role in the revenue sharing central monitoring also contributed to a decision on the revenue sharing from mountaineering and tourism royalties to the districts. earlier central government used to keep all the royalties. Government of Nepal through the budget ordinance has committed to share these revenues with DDCs. This has been a significant contribution of ADDCN. It should also be mentioned here that ADDCN has successfully mediated a dispute about sharing of hydro-electricity generation revenue between four DDCs. Its mediation assisted the DDCs to unanimously agree on a revenue sharing formula. ADDCN has provided input for restructuring the Local Development Training Academy (LDTA) with a view to governing it through representatives of LBs. A LDTA Reform Committee was formed to suggest the restructuring modalities and the committee has submitted the report that has been sent to cabinet with a recommendation for its implementation.

b) State Restructuring

More recently following the formation of the constitution drafting committee after the people’s movement “second” ADDCN prepared a proposal on local governance to be provisioned in the interim constitution. This proposal was circulated among different political parties and submitted to interim constitution drafting committee. In its more recent activities ADDCN also prepared theme paper on future LG structure in connection with the current debate on the issue of restructuring of the state”. ADDCN, in association with the Local Government Coordination Committee, has organized a series of workshop across the districts to share the theme paper on LG proposed structure before the political activist and obtain the feedback. Such workshops have already been completed in 7 districts and more is being planned in several other districts ADDCN is now acknowledged by central institutions. Due to its pro-active nature many national and international organizations have proposed ADDCN to play a coordinating and lead role in some of their activities. Some noteworthy activities accomplished are:

Lobbied for the amendments of the conflicting provisions of the Act and Regulations

Workshop on “Recent issues on local self governance act and its implication” held; Regular publication of Local Democracy and ADDCN Bulletin; Regulations specially related to DDC’s authority to sell sand etc amended; Drafts of various Local Government By-Laws and guidelines developed; Various IEC materials related to energy and environment published and

disseminated; Drafts on the Amendments of Sectoral Acts conflicting LSGA & R/R completed; Assisted in making recommendations for standard formats for bye-laws;

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Drafted model Local Service Act and forwarded to MoLD; Drafted a model code of conduct for LG officials and disseminated to all DDCs; Proposed a draft LSGA amendment bill addressing the adequacy of women

representation in LG and guidelines drafted to ensure effective participation of women representatives;

Influenced the sectoral devolution agenda of the respective ministries of health; education, agriculture and postal service.

These activities have strengthened the position of ADDCN as an active and influential body able to represent the interest of DDCs. c) Represent local government interests in national, sub-national and local level

ADDCN’s active participation in various committees formed by government has been greatly appreciated. Some of its involvement as committee members are noted below. Then GoN – Donors joint committee was constituted to review the decentralization reform in Nepal. ADDCN participated in the committee and functioned as the Secretariat. “….This has enabled ADDCN to exert wider and significant influence over central level policy making bodies and helped establish ADDCN as an institution difficult to avoid and bypass in matters related to decentralization and local governance.” (DASU/Danida, 2001: 57). ADDCN has produced a policy document that summarized the major findings and recommendations of the Peer Review Report. This document has become a leading point of reference and the guidelines are helpful to understand current decentralization issues. MoLD formed a Joint Coordination Forum for Local Governance (JCF) in July 2001 and five thematic groups (fiscal decentralization; institutional development and capacity building; monitoring and policy feedback; sectoral devolution and organization and structure of LBs) were also constituted. ADDCN represented in this forum. His representation in this forum has remained quite visible and influential. ADDCN was able to influence then Parliament Development Committee as well as political parties, central government institutions and professionals to exert pressure on the government to activate DIMC. ADDCN represented in the steering committee and the task force of the GoN lead multi donor Local Government Support Program (LGSP), aimed at enhancing the institutional capacity of LBs. Its representation in the steering committee and task force has been instrumental in influencing the capacity building areas of DDCs. The NPC for the first time approached ADDCN to seek its cooperation and support for the finalization of Interim Poverty Reduction Strategy Paper (IPRSP) that needed LBs consultation, endorsement and support. ADDCN also represent in a number of government formed working groups. “Recent acceptance of ADDCN as the lead institution in a newly formed multi-stakeholders consortium for District Periodic Plan (DPP) establishes it among donors as a component and influential partner in local development process (DASU/Danida, 2001: 58) ADDCN strongly lobbied to put the agenda of fiscal decentralization in the forefront. As a

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result of this a permanent Local Bodies Fiscal Commission (LBFC) was formed in 2002 and ADDCN became one of the members of the steering committee. After the formation of LBFC moves towards sectoral devolution got underway. In the last fiscal year full scale devolution was piloted in 14 districts of the country. ADDCN’s role in this development has remained significant. The advocacy role played by ADDCN has been duly acknowledged in the annual progress report of 2004 (DASU/Danida, 2004). LG restructuring study was planned. However, this activity was not given priority due to the question of its relevance in the changed context. ADDCN has effectively represented DDCs in various high level policy making bodies such as the National Development Council (NDC), Decentralization Implementation and Monitoring Committee (DIMC). It has also played an active role in the preparation of Poverty Reduction Strategy Paper (PRSP), the Tenth Plan and in Local Bodies Fiscal Commission. It has also represented in various national level committees such as NIC, NMIS, REP, REDP, PAF, LDTA, DWSFB, Road Board, DRSP, NIEC, RUPP, RWSSFB, RAP, Central Citizen's Monitoring Committee, and National Adolescents Coordination Committee. d) Partnership Building ADDCN built partnerships with various stakeholders and collaborated with bilateral and multi-lateral donors and international NGOs working in the country in areas of decentralization and local self governance promotion. ADDCN’s agreement with the Decentralization Advisory Support Unit (DASU) in 1998 under Danida was a milestone for ADDCN in strengthening overall institutional capacity of ADDCN and to provide strategic services to its member DDCs. ADDCN has successfully accomplished various public health related awareness and information dissemination program in partnership with WHO and UNICEF. ADDCN has been approaching DanidaHUGOU, DFID and CECI for continued support in its activities. It has also developed partnership with: UCLG. Now a days ADDCN has played vital role in UCLG in the capacity of Vice-President for the tenure of 2006 – 2008. ADDCN has become the member of the International Union of Local Authorities (IULA) and the membership has been renewed every year. ADDCN has also established its partnership with Local Government Denmark (LGDK), World Bank, WHO, UNICEF, UNDP, SDC, GTZ, SNV, AEPC, USAID, CCO and Care Nepal. ADDCN has remained an active partner of the UNDP in its PDDP/LGP program which is now currently executed in the name of DLGSP. It should be noted here that due to the dissolution of parliament and the royal takeover, ADDCN’s activities to influence national policies have been greatly hampered (DASU/Danida, Annual Progress Report, 2003). On the whole ADDCN’s ability to influence national policy and represent the interest of DDCs has significantly enhanced. This can be endorsed by varieties of activities it has performed since its inception as discussed above. 3.2.2 OUTPUT TWO

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Institutional capacity of ADDCN strengthened a) Strengthening ADDCN’s Institutional Capacity ADDCN from an organization with few staff has grown into a bigger organization. The activities accomplished to strengthen its institutional capacity are as follows. Professional Manpower and Office Equipment In order to make all the units fully functional and efficient 10 new professional staffs were recruited. One data base officer was also recruited to work upgrading LGs fiscal database. This has greatly assisted in the ability of the organization to achieve the stated goals and objectives. It should be noted that a job performance appraisal system has been introduced and thus a scientific evaluation system has been developed in ADDCN. The infrastructure of the organization was upgraded with better facilities and systematic functioning such as computer, furniture etc. This has improved the working environment of the organization. However, the computers and furniture have been quite old and obsolete. So office equipments including new computers with better configuration has been felt essential. ADDCN reached an agreement with NALAD on February 2000 for five years. Under this arrangement various activities have been carried out and completed which has helped ADDCN staffs to further broaden their knowledge and experiences. Staffs and members have also been trained on data base management. The understanding of the staffs on IT has widened which is expected to be utilized for information management. This agreement has a far reaching impact on the institutional capacity of ADDCN. Training & Exposure Visit Four personnel were given 7 days TOT on DPP preparation. This has strengthened the capacity of the organization in providing timely technical support to member DDCs on DPP preparation NALAD has also arranged an exposure visit of Denmark to Executive Committee members. This tour has given international exposure and has enhanced the understanding of the members on the working of NALAD and practices of local governments in Denmark. Professional staffs also participated in different training program, study visits and other activities which has further strengthened their skills and abilities. Internal Communication ADDCN has experienced an improvement in international communication through networking with intranet, internet and email. Such facilities have accelerated the exchange of information Development of Strategic Business Plan Following the recommendations from the review mission 2000 ADDCN prepared its five years strategic business plan in 2001 which was reviewed and endorsed by the Executive Committee at the Strategic Plan meeting held in Mustang. This plan included development of strategies and guiding principles, outputs and activities of each of its five Units. Establishment of Documentation Center and Web Site

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The documentation center has been established and upgraded. The CDS/ISIS System (a software to manage document archive) has been installed and operationalized. A staff has been trained in Library System Management. Now the documentation center archives more than 1000 books and documents and can be searched electronically. ADDCN has developed its own website and updated periodically. A brochure in a booklet form has also been published and updated. .

In more recent years few professional staffs including Executive Secretary General has left the organization and there has been the dearth of professional staffs. ADDCN has also experienced difficulties in recruiting appropriate replacements. This together with the lack of specific staff retention policy, ADDCN’s professional capacity has been severely limited in recent days. Lack of regular and strong financial resources have seriously raised the issue of institutional sustainability of ADDCN.

3.2.3 OUTPUT THREE

Ability to provide appropriate response and timely service increased The changed political situation in the country especially after dissolution of parliament has hampered ADDCN's service provision to member DDCs. Notwithstanding this ADDCN has been successful in delivering following services to its member DDCs. a) Capacity Strengthening of Member DDCs One of the main objectives of ADDCN is to help member DDCs in building their capacity and providing other required services on timely basis. ADDCN since its formation has been providing technical advice, training, visits and other supports requested by DDCs. As a result of this DDCs planning and management capabilities has enhanced. ADDCN has been providing technical service to DDC in the preparation of DPP. Four professional staffs of ADDCN have been fully involved in the DPP process as lead and co-facilitators. ADDCN has been invited by many DDCs to assist in the preparation of the DPP. The preparation of a DPP facilitator’s manual was very noteworthy. It has provided “Local Facilitator” training in DDP preparation It has assisted 28 DDCs in their DPP planning exercise. So far 52 DDC have prepared the DPP. Thus, the competency of ADDCN to provide technical support in the preparation of DPP has been greatly enhanced. ADDCN has also helped in preparing the strategic plan of 28 DDCs. ADDCN has provided advisory services to DDC integrating natural resources, energy and environment in DPP preparation. ADDCN has assisted DDCs in the institutionalization of District Information and Documentation Center (DIDC). Likewise, technical assistance was provided in establishing and enhancing the Human Resource Development Center (HRDC) in DDCs. The District HRD by-laws has been prepared to support DDC HRD Center and circulated to member DDCs. ADDCN has played an instrumental role in forming DDF & Internal Audit Section (IAS); IAS has been established in 67 DDC and ADDCN has provided training and refresher training to IAS staff; Internal Audit Manual 2058 has been prepared and updated. It has been observed that this manual has helped a lot in carrying out audit task.

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To further add in the list of the services provided to member DDCs a handbook of renewal energy for local government has been prepared. A draft code of conduct for LBs representatives has also been prepared. Furthermore ADDCN has successfully completed “revenue potential study in two districts. The study findings are expected to provide a framework for enhancing internal revenue generation for all DDCs. ADDCN has also facilitated to prepare two years capacity development plan of 20 DFDP program districts. A gender audit training was also organized. The overall performance status of ADDCN has been summarized in the following table in the log frame format .

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Log- frame: Expected Outputs, Activities and Progress

Outputs S.No Activities Achievements Facilitating Factors Limiting Factors

1. Activity 1 Advocate and put pressure for decentralization and local self-governance

Prepared proposal to carry out and advocacy for the

amendment of LSGA bill Preparation of concept paper on restructuring LBs Prepared worldwide comparative statement on fiscal

allocation Identified 23 contradictory acts Identified major issues of restructuring local bodies Documentation of achievement and weakness of

local self-governance Prepared proposal on new structure of local bodies

and submitted to donors Publication of book on state restructuring by

Chairman

Support from DASU received in many areas of its activities Review missions recommended many

ADDCN continue to advocate satisfactorily for devolution and decentralization, however the absence of central level democratic institutions results in increasing difficulty for effective advocacy for decentralization

1.1 Develop Website Website developed & periodically updated

1.2 Launch Radio Program Aired fortnightly LG programs from selected FM radio stations

1.3 Conduct debate on special theme

Initiated interaction & discussion to include Local Self Governance into Interim Constitution

1.4 Prepare advocacy materials and disseminate

Review of structure & number of Local Government Fiscal decentralization Rural energy development Local planning and LSGA revision Draft report on local service act LSGA revision

1.5 Maintain continuous dialogue with government institutions mainly MoLD

Prepared reformed Self Governance Acts proposal and informed to Local Development Minister and the Secretary of MLD

OUTPUT 1 Ability to influence national and to represent the interest of District Development Committee enhanced

1.6 Help assist DDC and other Joint press release with associations of local bodies

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stakeholders to identify the critical areas for refinement

to appeal for discussion on current situation

1.7 Identify critical areas of discussion in the matter of fiscal decentralization

Evaluation of status of fiscal decentralization Prepared budget ceiling of three fiscal year and

incorporated in Red Book of 5 fiscal year

1.8 Participate in Thematic Group Participated in JCFD

2 Activity 2 Provide legal and counseling/consultation services to DDCs

Circular of MLD and NPC to the DDC collected and distributed

Prepared IEC materials on contemporary issues, precedence and disseminate to member DDCs

Conducted Internal Revenue Potential Study in various geographical regions

Provided advisory services to DDC integrating natural resources, energy and environment in DPP

Support from DASU received in many areas of its activities

Absence of elected body delayed many policy related decisions

2.1 Provide technical support in preparing District Periodic Plan

Assisted 28 districts to prepare DPP 52 districts have prepared DPP

2.2 Prepare Strategic planning for its member DDCs

Strategic plan of 25 DDCs prepared

3 Activity 3 Research, publication and documentation/information network on decentralization local governance and participatory development;

Research on historical development of local

governance Prepared proposed manual of information

management - 2063 Monitored directive through orientation program in

Morang and Kaski Publication of decentralized energy planning system

guidelines Published and distributed books on Transparency

and Accountability of Local Bodies (600 pieces) Handbook on “Rural Energy Technology” for Local

Representative Rwo-posters on Renewable Energy

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Two issues of Success Story –Related to Energy and environment

3.1 Data/ Info collection/Compilation

Prepared sectoral database

3.2 Development of IMS MIS developed Developed and finalized information strategy

3.3 Establish Documentation Center

Documentation center established and updated

3.4 Publish quarterly “Local Democracy”

“Local Democracy” magazine published and distributed

3.5 Publish occasional “ADDCN Bulletin”

Distributed bulletins covering present scenario

3.6 Database of all 75 DDCs prepared

Collected and updated information of till F/Y 2059/60

Develop DPP database Updated financial database of DDCs

3.7 Develop handbook/manual on local governance

Distributed 2500 pieces of ADDCN Dairy-2063

3.8 Support to Masters Thesis Support to 4 students provided

4 Activity 4 Promote issues related to social development focused on children, women disadvantaged groups and poor;

Strengthened gender subcommittee & developed

working guidelines, established gender forum Collaboration & coordination with different

stakeholders for implementing Gender Mainstreaming Guidelines

Support from DASU received in many areas of its activities

Absence of elected body delayed many policy related decisions

4.1 Conduct public health awareness and information dissemination program conducted

Mobilized DDCs in immunization, polio vitamin A, sanitation and leprosy national program

5 Activity 5 Established continued partnership with like minded

Approaching DanidaHUGOU, DFID and CECI for

continuing support

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institutions at national and international level in accordance with the vision, goals and objectives of the institutions;

5.1 Develop Partnership with bilateral ad multilateral agencies including similar associations

Partnership developed with: UCLG ,DASU/DANIDA, Local Government Denmark (LGDK), World Bank, WHO, UNICEF, UNDP, SDC, GTZ, SNV

6 Activity 6 Build capacity for enhancing institutional vis-à-vis planning & service delivery capabilities

Support from DASU received in many areas of its activities

Absence of local elected body coupled with the conflict situation delayed many policy related decisions

6.1 Staff recruitment 10 professional staff & one data base officer recruited

pre-job orientation workshop conducted

6.2 Arrange training program Training on computer to all the officers provided Training on secretarial and WINISIS and knowledge

management

6.3 Twining arrangement with NALAD

Orientation on data base management to members and staffs

OUTPUT 2 Institutional capacity of ADDCN strengthened

6.4 Exposure Visit Study tour of 5 persons at Denmark Study tour to Philippines by Chairman ESG visited USA as member of delegation ESG participated program on Fiscal Decentralization

in Cambodia HRD and Fiscal decentralization specialist

participated in training at Denmark

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6.5 Internal/external resource mobilized for financial sustainability

Mobilized donor agencies for resources Set membership fees to member DDCs in three

categories

6.6 Develop HRD policy and programs for professional staff of ADDCN

Personnel policy formulated Performance evaluation policy developed and

implemented Establish LAN at Secretariat

6.7 Prepare TOT manual and train

Seven day training TOT on planning process to 4 officers of ADDCN

TOT on gender TOT to legal officer TOT to 8 district program officers and 12 NGO

representatives on transparency and accountability

6.8 Establish MIS & database system at the Secretariat

Prepared and update financial database of DDCs

6.9 Develop manuals for financial mgmt, staff mgmt, planning and monitoring and evaluation of ADDCN

Prepared internal working guidelines of each unit Developed manual on policy of fiscal

decentralization, sectoral devolution, legal support Prepared manual on transparency and achievement

of financial assistance, contingent expenses and discouraging abuse of authority

Published 1000copies of ADDCN constitution Updated Boucher

6.10 Develop Accounting System Prepared fiscal database Prepared accounting manual

6.11 Launch various capacity enhancement program (training, workshop, reward, promotion, educational tours)

Introduction to LFA to all staff Workshop on report writing Training of Management Development to executive

committee Field visits for staff to district

6.12 Preparation of code of conduct for office bearers and staffs of the Association

Prepared staff manual Prepared model code of conduct for LG

representatives and model citizen charter

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7 Activity 7 Represent local government interests in national, sub-national and local level

Represented at: NDC, LBFC, DIMC, NPC, REDP, AEPC PAF, LDTA, DWSFB, Road Board, DRSP, NIEC, NGO database management, RWSSFB, Central Citizen's Monitoring Committee, National Adolescents Coordination Committee etc

Support from DASU received in many areas of its activities

Conflict situation coupled with political uncertainties severely constrained ADDCN ability to provide services to DDCs

7.1 Finalize governance manual Documents compiled and finalized but need to publish

7.2 Representation in Forums and Meeting

Regular participation in all the forums and meeting

7.3 Prepare a set of byelaws/guidelines

Prepared various bylaws such as Decentralized Energy guidelines, gender mainstreaming in local governance guidelines, HRD guidelines, DIDC operation guidelines, Local development fee by laws

7.4 HRD services to DDCs Conducted series of training

7.5 Prepare working strategy & guidelines to involve DAG in development process

Established matching fund of Rs 100000 for supporting kamaiyas

OUTPUT 3 Ability to provide appropriate responsive and timely service increased

7.6 Organize LG ‘Best Practices” competition

Prepared a concept paper with the assistance of NALAD

Preliminary checklist for LG best practices developed & circulated

TOR of the best practices competition prepared and sent to the DDCs

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CHAPTER FOUR

PERFORMANCE OF ADDCN: STAKEHOLDER’S PERSPECTIVE

4.1 Background This chapter documents the perceptions of various stakeholders on the performance and activities of ADDCN. The stakeholders are classified into five major categories. They are: Former Elected Representatives and officials of DDCs Other Local Bodies Association Government Agencies Bilateral and Multilateral Donors Institutions engaged in decentralization and local governance In order to obtain the perceptions of various stakeholders’ interaction meeting with them was organized. 8 DDCs representing different ecological and development regions were selected and visited. Major themes like advocacy role, support to DDCs, relationship with DDC and other LB associations, organizational structure, relevance in the changed political context, sustainability, were chosen to obtain their views and perceptions. Officials meet during interaction meeting and field visits of DDCs are presented in Annex 4.1. Stakeholders’ perceptions capturing major themes are described below. 4.2 Perception of Former Elected Representatives and DDC officials a. Advocacy and Pressure Building Activities

All the surveyed DDCs former elected representatives and officials unequivocally appreciated the role performed by ADDCN in decentralization and local governance. They gave credit to ADDCN for the enactment of LSGA and R/R. b. ADDCN and DDC relationships

The absence of elected body at the DDC has caused a little gap in the relationship between ADDCN and DDCs. A provision should be made in the ADDCN constitution to strengthen institutional relationships between the two. A technical level relationship between the two will enhance DDC ownership feeling on ADDCN and will also eliminate the false projection of ADDCN as a political club. c. Size of ADDCN Council

The former elected representatives observed that the Council is too large and its size should be made manageable. They further noted that for the efficient use of financial resources this is essential. d. Political Neutrality

ADDCN is a political body so it is difficult to keep it away from the belief/policy of political party. However, it is important that the Chairman and the Executive Committee members should leave behind the political ideology and party politics and devote themselves for the cause of the organization. It was observed that a provision should be made in ADDCN constitution that the Chairman remains politically neutral till his term. Such changes in the constitution will help ADDCN to retain its proactive role for the cause of decentralization and local governance in Nepal. e. ADDCN’s representations in committees

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Dissatisfaction has been expressed relating to the activity in the board and committee where ADDCN has representation. It has been noted that ADDCN bi-passed totally the organization they represent - the case in PAF and RWSSFB. Both the organizations bi-pass DDCs in their activities. ADDCN should not send its representative if such organization does not recognize the importance of DDCs. It should, however, be noted here that RWSSFB has made it mandatory to submit the recommendation letter from the DDCs to get the project approved. Furthermore, it was learnt that the Board has made a decision not to support any project that was not endorsed by the District Council. It has thus been argued that the role of DDCs has not been completely overlooked. f. Governance Structure

Majorities of the participants noted that it will be premature to say about the future of ADDCN until we have a clear picture on the new governance structure. If there will be the provision of district, we definitely need strong ADDCN to lobby. If some new form appears, we should consider about its changing role. As the primary role of ADDCN and other local body associations are to lobby for decentralization and ultimately establish a full functioning local government, it will not be inappropriate if we consider amalgamating three LG Associations and replace it with a much stronger local Government Association. g. Decentralization

Although we have achieved some tangible things in decentralization, there is still a need for a body that mobilizes people for supporting further decentralization and also to point out lapses to the policy makers and other key decentralization players so that everything moves in the right direction. Decentralization Support Society (DESSO) is one such organization that carries out these issues. h. Sustainability

Financial sustainability is the basic challenge of ADDCN. Surveyed DDCs observed that membership fee alone cannot sustain ADDCN’s expenses. Given the contribution made by ADDCN on the increasing resource mobilization of DDCs, it is appropriate that some arrangements be made to contribute ADDCN, a fixed percentage say 1% of its internal revenue. Annual contribution should also be provided in the budget. This will improve financial situation of ADDCN. The views expressed by former elected representatives including DDC officials of surveyed DDCs by major themes are summarized in Table 4.1.

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Table 4.1 Perceptions of DDC Officials including former elected representatives

S.N Theme Perception 1 Promotion of

decentralization & Local governance

• Lobbied for decentralization acts and enacted LSGA and regulations • Devolution of Essential services including full scale devolution moved • Provided input in the formulation of the acts. • Contribution to bring out Fiscal decentralization resulting to change in financial regulations

giving power to DDC to impose new taxes • Formation of DIDC

2 Support to DDC’s capacity enhancement and HRD

• DPP Manual prepared; assisted in the preparation of DPP of 28 districts • Technical support provided while preparing DPP to other districts • Widened resource base of DDCs • Conducted training on renewable energy • “Local Facilitator” training in DDP preparation; • Provided training to elected representatives

3 Social mobilization • Coordinated health related program effectively. • Active in social mobilization program specially in national health programs

Partnered with UNICEF in carrying out program of “social mobilization through local governance” event such as Vitamin A , Leprosy, National Immunization day etc was very effectively

• Activated all the DDC representatives in national social events • Make Polio eradication program very effective

4 Organizational structure • Present structure is okay • Make structure slim & strengthen the Secretariat • One single Local Bodies Associations could be the better approach rather than a separate

one for each • Pioneer in SAARC countries to institute such an inclusive structure where room for all party

representation has been guaranteed 5 Communication Network • Website is helpful but need to update; helped to develop DDC’s own website

• All publications regularly received • Sthaniya Prajatantra a quarterly publication of ADDCN is very good both by content and

substance 6 Sustainability • Government must provide administrative grant to ADDCN to support for its administration

• ADDCN needs to identify new revenue sources of DDCs & charge certain percentage on it. • Dialogue with Maoist at the center and find out solutions regarding revenue generation.

ADDCN, in turn, can charge certain amount on collected revenues. • Increase membership fees. • DDC should provide certain agreed proportion of its internal revenue • Provide certain percent from the grants • Allow certain percentage of registration charge • Upscale and downscale its activities according to income sources • Scope of increasing membership fee limited, all the revenue sources are being tapped by

Maoist, • Can assist in exploring and coordinating donors support to DDCs in their DPP and DAP • Service fee can be increased

7 Support to DDC in resource identification and mobilization

• Pressurized the government to increase grants and constitute Fiscal Commission; • Increased grant & became more systematic than before; revenue sources widened after the

establishment of LBFC • ADDCN can provide its professional input in identifying resource potential of the DDCs

8 Mobilization/coordination of foreign aid

• ADDCN needs to be proactive for internationalizing & mobilizing support • Unable to mobilize international support for the districts equally • Can play a significant role in exploring donors support in the District annual Plan of DDCs.

This could be one potential source of income of ADDCN • Can facilitate in obtaining fund from donors and some contingencies amount can be set

aside for ADDCN from such support

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9 Gender Equity & empowerment

• Proposed 33% reservation for women for the first time • Mandatory provisioning of a women member in The Council • Worked on gender mainstreaming • Established women subcommittee • Emphasized women participation in development works • Advocated for gender equality • 5 % reservation set for women, ADDCN strongly lobbied to increase the reservation. • Inspired by ADDCN & allocated Rs 15000 for each VDCs to train all women VDC members

10 Financial Management & transparency

• Contributed to establish and manage DDF • Training/ refresher to staff of IAS provided; prepared audit manual; assisted in account keeping • Manual for public hearing has been prepared • DDF is working as a post office. The procedure and modalities must be transparent • Conducted training on financial management, established Internal audit Section Supported to

develop financial manpower • Trained local staff to prepare account and audit reports • Practice of pre-audit introduced • Financial management and transparency improved • Found out 153 contradicting financial regulations • LBs & GON has two separate financial regulations act and many clauses contradict with each

other. ADDCN failed to act on this front. 11 Dispute Settlement • ADDCN helped to settle the dispute in revenue sharing

• Assisted in designing revenue sharing • Helped in designing revenue sharing formula from Kali Gandaki hydro project and resolve the

dispute • Ongoing disputes among LBs relating to resources sharing. ADDCN can play a very effective

role in resolving such dispute; 12 Potential Areas of

ADDCN’s Assistance • Speeding up the devolution process • Contribute in state structuring process • Conduct programs being in tune with PAF, Renewal Energy • Contribution to strengthen decentralized local governance • Coordinate with LDTA in organizing training programs & conduct all the training program for LBs • Lobbying for inclusion of decentralization into constitution • Monitoring decentralization process in changing context • Address the gap in the knowledge between UG and DDC technician. Often times UG do not

understand officials formalities required. ADDCN can arrange training/workshop to aware the UG members

• Annual budget of FY 2006/07 has made a provision of block grant of Rs 1 Million to each VDCs. But no directives have been issued so far regarding the itemized expenditure ceilings. Along with the authority such directives is required. ADDCN can play an effective role in this sphere.

13 Representation of ADDCN in national level organizations/Safeguarding DDCs interest in different forums

• Put revenue issues in MLD • Advocacy of the issues in different agencies and forum • ADDCN has been raising voice on DDCs issues and concern • ADDCN is represented at RWSSFB as the Chairperson of the Board. Board require DDC

recommendation, however, in the selection execution & monitoring DDCs are completely bypassed.

14 Internalization of decentralization & governance issues

• Worked to internationalize decentralization movement & built good relation with international community

• ADDCN is internationally recognized & has good relation with international agencies • Popularized Nepal as decentralized nation but must act more to increase relation

15 Support to DDCs in resolving legal matters

• DDC itself is resolving its legal matters • ADDCN does not have legitimate power to handle DDC’s legal issues

16 Gap between DDC and ADDCN specially during the absence of elected members

• Gap between DDC and ADDCN exists in the absence of elected members • An ad-hoc mechanism is needed to fill the gap • At present, there is vacuum, an interim system is required • Need to build an institutional relationship on the absence of elected body

District specific view by major themes are presented separately in Annex 4.1.

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4.3 Perceptions of Government agencies including MOLD MOLD observed that the Secretariat of ADDCN is not very strong. It lacks retention policy of the existing staffs which has resulted in the dearth of experienced manpower. They perceived that the relationship between DDC and ADDCN is very weak. ADDCN has been criticized for not being very proactive. LB Central Coordination Committee is not very effective. Its activities are limited to bringing out joint statement only. It was further observed that in the sphere of devolution ADDCN could not perform satisfactorily. ADDCN has assisted the government in drafting the code of conduct of LBs, Local Service Act, various manuals and guidelines including Gender Audit. It was also jointly associated in preparing DPP and capacity development strategy for DDCs. It has been perceived that the present structure (Council, Executive Committee) of ADDCN is big. The Units are also very diverse. From the sustainability point of view it can follow the model of out sourcing of its selected activities. It was blamed as being more political than institutional. That is why its delivery part has remained very poor. To make it sustainable ADDCN can take the responsibility of providing training to LBs in coordination with LDTA. 4.4 Donors Perception ADDCN has played a significant role in creating awareness about decentralization in Nepal and lobbied for its implementation but still it is weak in capacity to carry out many important agenda for the success of decentralization. Its capability needs to be developed. ADDCN must have a strong relationship with MoLD as it is the patron agency in the government on decentralization. Absence of smooth relationships may jeopardize many of its work and makes it weaker. DFDP has supported ADDCN for preparing a capacity development plan of 20 DDCs. Similarly, it has also supported for developing manuals for district level planning, financial management, monitoring and evaluation, users committee and operation and maintenance etc. But this has never been implemented at the grass root level for which it was designed. It is said that the prepared manuals are still in the table of MoLD and they are taking long time to approve its. ADDCN seems not taking it seriously. We are watching when it gets approved from the ministry and how ADDCN circulate it to its member DDC for implementation. Perhaps, equally important is a mandatory provision for monitoring the implementation of these manuals by DDC. ADDCN should seriously consider its. We are aware that ADDCN is under financial stress at present and it should do no stone unturned for improving its resources base. One such area which it should consider is conducting a series of training for DDC personnel because of economy of scale it could provide. It can do it at relatively low cost and at the same time generate revenue for itself. UNDP officials observed that as a member of the steering committee it has performed extremely well. While other members tend to remain inactive, ADDCN did come up with innovative ideas. In that respect as a member in DLGSP, RUPP, MEDEP, REP, REDP ADDCN has been performing its role satisfactorily. After mid July 2002 due to the absence of elected representative in local bodies ADDCN’s role has been limited. All the donors interacted during the study consistently raised the question of its legitimacy.

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It should, however, be noted that due to the absence of elected representatives at DDCs the Council election could not be held for new leadership. This has remained a major constrain in the ADDCN activities. It has been observed that ADDCN should perform a role of advocacy on key local governance issues and should focus its activities on transparency and accountability of LBs. It should also help on the planning process. They are of the view that ADDCN should create a forum to debate on constitutional process and governance issues. It should act as a watch dog if government acts against decentralization policy. Regarding institutional sustainability example of Uganda was cited where government provides direct funding to its local bodies associations. They are, however, against this practice. They are skeptical that if they depend on government funding then ADDCN may fail to act as a pressure building organization. They, however, noted that government should provide building so that its overhead cost be significantly reduced. Regarding its potential role of coordinating donor funding to DDCs they are of the view that ADDCN should not be given the role of coordinating the donor funding rather it can facilitate only. Its relevancy is quite high even in the changed political context also. But since there is no elected body & question of legitimacy is being raised in such situation it can work in a low profile. USAID supported ADDCN to work in strengthening transparency and accountability of Local Government. The support was made available for two years. On the whole the performance was judged as satisfactory. Later on the due to the dissolution of parliament and absence of local bodies the question of legitimacy was raised. Assistance could not be continued as government stand was not very clear. Moreover, ADDCN was also not very assertive to demand for the extension of the project. The problem of strong leadership in the Secretariat was felt. ADDCN should lead the debate of restructuring of the government. It should also advocate for the institutional autonomy of DDCs 4.5 Other Local Bodies Associations (MUAN & NAVIN) MUAN and NAVIN admitted having a very cordial relation with ADDCN. 9 members LB Central Coordination Committee has been formed to act collectively on areas of common interest. like local autonomy, decentralization, devolution. However, there have been the differences in the focus. MUAN focuses on “growth” where as ADDCN and NAVIN focuses more on “distribution”. We have also strongly lobbied with the Interim Constitution Draft Committee to make provision of LBs in constitution itself. Both the associations were very critical with the capacity building activities of ADDCN that focus only to DDCs. They expressed their reservation about Donors approach to patronize one single institution. Though MuAN is receiving external assistance from other donors they are of the view that MuAN should also receive other external assistance meant for consolidating the process of decentralization and local governance in the country. They are little skeptical about the performance of ADDCN and noted that its activities have confined to district headquarter alone and thus failed to reach to villages. DDC does not have its own territory so it can not strictly be called local body. In the task of decentralization, the role of MUAN and NAVIN can not be ignored. The idea of one single association need rethinking as the issue of Municipality and Village is different. DASU should not have patronized ADDCN only. May be as an entry point the approach is okay but MUAN and NAVIN should have been equally supported. In the changed political

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context we now moving jointly and organizing series of workshop across the country on restructuring issue of the Government of Nepal. Sustainability

Government should allocate certain amount on regular basis as ADDCN has been performing government tasks. Membership fee can be raised. Software component of capacity building part in many countries is managed by LBs so ADDCN should venture it. We are negotiating with the government to pass on LDTA to LBs association so that MUAN can handle the need of Municipality and ADDCN and NAVIN can manage DDCs and VDCs training need. ADDCN should initiate a task so that revenue sharing could be made on the basis of functions done by LBs. 4.6 Other related agencies: Other related agency that has partnership relationship with ADDCN like PAF, REDP, AEPC, IGD and INLOGOSS were also interacted. The agencies observed that ADDCN should work on constituting Local Bodies Service Commission. They have also appreciated the contribution made by ADDCN in making enabling laws. The major issue is the reinstatement of the LBs. In the absence of this the government should come out with some interim arrangement with all party representation so that congenial atmosphere could be created and ADDCN could perform. They further observed that political influence prevails while constructing road in districts, ADDCN can play significant role to minimize this undue influence. It can as well represent in District Road Commission created by DDCs. They suggested that ADDCN can contribute in fixing the district rates. The agencies further noted that District Technical Office (DTO) can be internalized in DDC if ADDCN take initiation. Rural Energy Development programme has been providing financial assistance to ADDCN since three years which has been spent for the publication of manual of alternative energy. This has been found very helpful. Due to political instability, work of ADDCN is not found very effective. Since 1996, REDP programs are running into 25 districts, but nobody in DDCs knows except LDO about the program. The program will spread over 40 districts in near future. DDCs needs to be made more capable and efficient to handle program of such magnitude. They suggested that DDC could seek more technical support from ADDCN in this respect. In the area of renewable energy the concerned agency opined that ADDCN can work in awareness/campaigning of energy related programs. It can further lobbying with the government for energy policies in 11th Development Plan. The officials from INLOGOSS were very particular about the present structure of ADDCN and suggested to revisit the structure of ADDCN. They observed that it is less economical to have such a big structure. Some other important issues emerged during the meeting are listed below:

ADDCN lack strong legal base. It does not have its own act rather registered under the National Directive Acts 1961. This make the organization difficult to grow. It should have its own act

Full scale devolution manual has been prepared and ADDCN has been made one of the partner in this exercise

Need to amend the Karya Bivajan Niyamawoli

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ADDCN’s functions should be made clear. It even coordinated the task of Polio

eradication, vitamin A distribution. Are these the activities ADDCN should be doing? It has, however, been argued that such association helped to do social mobilization.

ADDCN should work as a pressure group. But it could not remain politically neutral body.

The approach of single LBs Association is a welcome one. Should act as the investigative journalist. There should be a need of journalist

association that writes exclusively on LBs. ADDCN should work in resolving the dispute between LBs ADDCN was not very pro-active in making the DDCs to open up subject wise unit

in the DDC. MOLD can shift/transfer some task to ADDCN and accordingly provide resources

viz., task of local service act, HRD plan of LBs, task relating to local tax etc The name of MOLD should be changed as Ministry of Local Governance Introduce the concept of E-Governance it will help to reduce the cost of ADDCN ADDCN can negotiate the budget for LBs as FNCCI is doing for industry.

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CHAPTER FIVE

SWOT ANALYSIS This chapter attempts to examine the strengths and weakness of ADDCN. It further analyzes the opportunities and the possible threats it may confront in future, briefly termed as SWOT analysis. This analysis has its own advantages as it guides the organization while moving ahead strategically. Strengths, weaknesses, opportunity and threats of ADDCN are listed as follows: 5.1 Strengths

Its importance has been increasingly recognized by all stakeholders. It has a strategic plan with clear cut vision for the future. Its strength lies in making the both the Council and Executive Committee as

inclusive. To make a mandatory arrangement of at least one female member from each DDC in the Council should be considered as its strengths. This will ensure the interest of women development and empowerment. Furthermore, ADDCN has established the tradition of offering the seat of Vice-chairpersonship to a Council members belonging to a party that has second largest majority in DDCs. These provisions have made ADDCN as inclusive institutions having representation of all political parties. In other countries where LBs association prevail such arrangement is lacking.

It is a representative, collective institutions of all 75 DDCs which are its institutional members.

ADDCN has been established as an responsible institution advocating the need for decentralized democratic governance system in the country.

ADDCN’ has gained and build up knowledge in the matter of decentralization and local governance.

Government of Nepal has been fully committed to decentralization and accordingly moving ahead toward full scale devolution of some essential services. In this respect LBs require greater degree of support from Local Government Associations to implement the devolved functions more effectively.

ADDCN has represented in various national level policy making bodies Institutional recognition at national, sub-national and international level. Such

recognition could be used to further strengthen its existence and effectively represent DDCs interests.

Established strong institutional relationship with major political parties through respective members of ADDCN

Established as a credible coordinating organization at different agencies/ Has played noteworthy advocacy role and has put the pressure to the government in

the enactment of LSGA, its Regulations, DIP and has supported in its effective implementation. .

It has established its institutional network and linkages with many agencies inside and outside the country as well. ADDCN is the member of United Cities of Local Government (UCLG).

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5.2 Weakness

ADDCN is registered under the National Directives Act 1961 by government decision.

ADDCN lacks political neutrality Lacks the experience of the management of local government federation and

associations Many member DDCs have not paid their membership fee regularly. ADDCN does

not posses any right to penalize the DDCs who have not paid their membership fee. It has been acting more as a political rather than a professional institution. Very large Council with 300 members. Too big professional structure causing high financial overhead Weak resource base and inadequate financial resource mobilization The important systems to govern any organization are planning monitoring and

evaluation and lack of these has hindered in making the organization transparent and accountable.

Lack of implementation of the action plan associated with its strategic planning. Involved in some agenda/activities not directly mandated by its constitution. DDC lacked to fully own the full scale devolution plan of the government. Lack of capacity to fully mobilize donor support. Too much dependency in one donor failing to diversify its network with other

donors. In the absence of elected representatives in DDCs, ADDCN council could not be

held 5.3 Opportunities

ADDCN, through other two local bodies association, could strongly lobby and advocate on democratic decentralized governance system. The success of the enactment of LSGA and Regulations has created a positive public image for ADDCN.

Many member DDCs perceive that due to the amendment/reformulation of the financial regulation, the resource base of the DDC has widened.

Decentralization and good governance has been the major agenda of many donor countries. In this context ADDCN has a tremendous scope to coordinate with donor agencies

Need for institutional capacity development of DDCs. Collective voice of all three local bodies associations through Local Bodies

Association Coordination Committee. There is a need for policy reforms. Some provisions of 23 existing Acts are still in

contradiction with those of LSGA. These contradictory provisions have not been amended yet. this is an area where ADDCN can exert influence to government

There is decentralization supportive policy environment. Government has already shown its commitment by piloting the full scale devolution in 14 districts of the country. ADDCN has the opportunity in this area to make the full scale devolution a successful venture.

At present restructuring of the state and new constitution making through constituent assembly is top priority of the nation. ADDCN has the opportunity to influence this process on the part of democratic local governance.

Drafting of new LSGA in accordance with the much discussed new structure of the

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state opens up opportunity to ADDCN to work for sound legal framework for democratic local governance.

5.4 Threats

Political uncertainties and unclear government structure resulting from second people’s movement.

Uncertainty regarding Government – Maoist negotiation and likely outcome. Political interferences at organizational level. Central level resistance to decentralization and local governance. Conflicting Acts

with LSGA have not been amended, DIP has not been fully implemented, DIMC not fully functional and LBFC is not very active. These instances show the delaying attitude of the government

Lack of short and long term sustainability plan Lack of elected representatives raising the issue of legitimacy of the Association Lack of retention plan of professional manpower Unable to fulfill the expectations of member DDCs. Withdrawal of donor support after the expiry of the tenure of elected representative

at local government/DDCs

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CHAPTER SIX

FINANCIAL SUSTAINABILITY OF ADDCN This chapter analyzes the income and expenditure patterns of ADDCN during 1994/95 to 2005/06. Based on this analysis, attempt has been made to assess the financial position of ADDCN and then suggest ways to make it financial sustainable. 6.1 Overall Position of Sources and Uses of Fund of ADDCN A. Sources of Fund: The sources of fund of ADDCN consisted of internal resources, program/project cost and Danida grant through DASU and HUGOU. The relative share of different sources in the total income of ADDCN for the period starting from fiscal year 1994/95 to 2005/06 is summarized below in Table 6.1. (Refer Annex 6.1, 6.3 and 6.4 for more information)

Table 6.1: Sources Fund of ADDCN for1994/95 to 2005/061

S. No. Income Source Total Income of the Period (in Rs. ‘000)

Income as % of Total Income

1. Internal Revenue 14,077 10.59 2. Project/Program Cost 55,433 41.71 3. DASU Grant 61,208 46.06 a. Fund Transfer 55,262 41.58 b. Direct Payment 5.946 4.47

4. HUGOU Grant 2,185 1.64 Total: Source of Fund 132,903 100.00

Source: Financial Statements and Progress Report for FY 2005/06 and Proposed Program and Budget for FY 2006/07of ADDCN, 2006

ADDCN came into existence during 1994/95. Looking at the situation of sources of fund for the entire period of ADDCN’s existence, the above table reveals that internal revenue contributed a meager 10.59 percent in the total income of ADDCN. Grant from DASU and HUGOU taken together was the highest contributory in the revenue pool with a share of almost 48 percent during the review period. Out of the total DASU share, 42 percent was by way of transfer of funds made to ADDCN whereas about 4 percent was through direct payments made by DASU on account of the procurement of goods and services for ADDCN. HUGOU provided cash grant to ADDCN during the period of April to June 2006. Table 6.1 gives the position of sources of finance of ADDCN for the entire period of its existence. It does not, however, give an idea about the financial resources of ADDCN for the period of Danida’s involvement in providing financial support to ADDCN activities.

1 Nepalese fiscal year generally commences on 16th day of July and ends on 15th day of July of the subsequent calendar year. During fiscal year 2005/06, DASU provided grant to ADDCN up to 31 December 2005 only.

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Inflow of Danida’s funds to ADDCN began from 26 March 1999 and was continued till 31 December 2005 through DASU and for the period of April to June through HUGOU. Table 6.2 below summarizes the sources of income of ADDCN for the fiscal year 1999/00 through 2005/06. (See Annex 6.2, 6.3 and 6.4 for more details) The pre-dominance of Danida funding in the total sources of fund of ADDCN is quite evident as its share has surged from the level of 48 percent for the entire period of ADDCN’s existence to more than 57 percent for the review period. Consequently, the share of internal revenue came down to 8.47 percent from the previous level of about 11 percent. Similarly, recovery of project/program cost contributed almost 34 percent in the total revenue of ADDCN. The situation is reminiscent of the increasing dependency of Danida grant to ADDCN as a major source of fund.

Table 6.2: Sources of Fund for FY 1999/00 to 2005/06

S. No. Income Source Total Income of

the Period (in Rs. ‘000)

Income as % of Total Income

1. Internal Revenue 9,358 8.47 2. Project/Program Cost 37,713 34.14 3. DASU Grant 61,208 55.41 a. Fund Transfer 55,262 50.03 b. Direct Payment 5,946 5.38

4. HUGOU Grant 2,185 1.98 Total: Sources of Fund 110,464 100.00

Source: Financial Statements and Progress Report for FY 2005/06 and Proposed Program and Budget of ADDCN for FY 2006/07, 2006

B. Uses of Fund:

ADDCN spent resources available with it for different purposes and activities. These included meeting the cost related to: a) fixed staff, administrative and office operating costs from internal resources, b) project/program expenditure out of fees received from the performance of consulting services, and c) basic capital, core operating expenditure and seminar related expenses from the grant received from DASU and HUGOU. ADDCN also utilized Danida funds for the provision of information to members and others as well as for the purpose of training, study and internship and also for twinning arrangement and short term consultancy. Furthermore, ADDCN is also found to have utilized its internal resources for the procurement of fixed assets like equipments and vehicles. Table 6.3 gives summarized position of various uses for which funds at the disposal of ADDCN were employed during the period 1994/95 to 2005/06. (See Annex 6.1, 6.3 and 6.4 for more information)

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Table 6.3: Uses of Fund of ADDCN for FY 1994/95 to 2005/06

S. No. Expenditure Source/Item Total Expenditure

of the Period (in Rs. ‘000)

Expenditure as % of Total Expenditure

1. Expenditure from Internal Source 13,610 10.732. Project/Program Expenditure 50,963 40.183. Expenditure from DASU Grant 61,142 48.21 a. Basic Capital Expenditure 5,495 4.33 b. Core Operating Expenditure 29,141 22.98 c. Provision of Information to Members

and Others 7,432 5.86

d. Training, Study, Internship 5,585 4.40 e. Twinning Arrangement and Short

Term Consultancy 90 0.07

f. Seminar Related Expenses 13,399 10.564. Expenditure from Danida/HUGOU

Grant 1,118 0.88

Total: Uses of Fund 126,833 100.00Source: Financial Statements and Progress Report for FY 2005/06 and Proposed

Program and Budget of ADDCN for FY 2006/07, 2006

Table 6.3 reveals that, during the period under review, ADDCN spent almost 11 percent of its total expenditure out of internal revenue generation to meet expenditure of fixed nature consisting of staff, administrative and office operating cost. Some portion of the internal revenue was also utilized for the procurement of capital assets which included equipments and vehicles. The share of project/program expenditure was in the range of 40 percent of the total expenditure. These were borne out of consulting fees/charges received by ADDCN from donor/other agencies on the performance projects/programs. As in revenue, expenditure side is also dominated by expenditure incurred out of Danida grant funds. Of the total expenditure incurred by ADDCN during the review period, the share of Danida grant is more than 48 percent. Out of the total DASU funds, core operating expenditure was the main area in which DASU funds were utilized with a share of 22.98% in the total ADDCN expenditure. This was followed by seminar related expenses (10.56%), provision of information to members and others (5.91%) and training, study and internship (4.40%) and procurement of capital goods (4.37%). A sum of Rs. 90 thousand was spent on twinning arrangement and short term consultancy which comes out to be 0.07% of the total expenditure of ADDCN. Taking into consideration the period after DASU started fund support to ADDCN; respective position of expenditure from different sources gets changed. Table 6.3 summarizes the uses of funds available with ADDCN during fiscal year 1999/00 through 2005/06 for various purposes. (See Annex 6.2 for detailed information)

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Table 6.4: Uses of Fund for FY 1999/00 to 2005/06

S. No. Expenditure Source/Item

Total Expenditure of the Period (in Rs. ‘000)

Expenditure from Source as

% of Total Expenditure

1. Expenditure from Internal Source 7,627 7.312. Project/Program Expenditure 34,421 33.003. Expenditure from DASU Grant 61,142 58.62 a. Basic Capital Expenditure 5,495 5.27 b. Core Operating Funding 29,141 27.94 c. Provision of Information to Members

and Others 7,432 7.13

d. Training, Study, Internship 5,585 5.35 e. Twinning Arrangement and Short

Term Consultancy 90 0.09

f. Seminar Related Expenses 13,399 12.854. Expenditure from Danida HUGOU

Grant 1,118 1.07

Total: Uses of Fund 104,308 100.00Source: Financial Statements, ADDCN, 2006

A closer look at Table 6.3 and 6.4 suggests that the expenditure from internal source and those on projects/programs comes down if one only considers the figures of post DASU funding support period. On the other hand, expenditure from Danida grant (Rs. 61,142 thousand from DASU and Rs. 1,118 thousand from HUGOU) remained the same in both the periods at Rs. 62,260 thousand. As a consequence, expenditure from DASU grant has increased from 49 to almost 60 percent in the post DASU support period as compared to the entire period. This is at the cost of expenditure from internal source which has declined from 10.73 to 7.31 percent and project/program expenditure from 40.18 to 33 percent of the total expenditure. This situation is indicative of the fact that the ADDCN has become increasingly more and more dependent on Danida fund to meet their expenditure needs. 6.2 Trend and Pattern of Income Sources A. Internal Revenue: As shown in Table 6.1 above, the share of internal revenue is about 11 percent of the total sources of fund of ADDCN during fiscal year 1994/95 through 2005/06. This percent declines to 8.47 percent when the period of post DASU financial support to ADDCN is only considered. (Refer Table 6.2) In all, there were 11 sources from which ADDCN generated internal revenue in the past. A summary of income generated from different sources of internal revenue and the respective share of each source in the total internal revenue of ADDCN during the period 1994/95 to 2005/06 is presented below in Table 6.5. (Refer Annex 6.5 for more information)

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Table 6.5: Sources of Internal Revenue during 1994/95 to 2005/06

S. No. Income Source Income of the Period (in

Rs. ‘000) Income as % of Total

Income 1. Membership Fee 7,814 55.51 2. Convention Entry Fee 105 0.75 3. Council Entry Fee 623 4.42 4. Grant from MLD 650 4.62 5. Subsidy from DDC 310 2.20 6. Contribution from Staff/Consultant 2,265 16.09 7. Institutional Cost from Project/ Program 1,749 12.42 8. Sale 24 0.17 9. Vehicle Rent to Project/Program 310 2.20 10. Guest Room 15 0.11 11. Internal Auditor Training Fee 212 1.51

Total: Source of Fund 14,077 100.00

Source: Financial Statements, ADDCN, 2006

Three principal sources contributed more than 84 percent of the total internal revenue of ADDCN. Membership fee alone contributed more than 55 percent in the total internal revenue whereas contribution from consultancy services accounted 16 percent of the total internal revenue. This is followed by the support from project/program under the heading "institutional cost" whose share stands at 12 percent. Moreover, these three sources appeared to be more stable by virtue of their occurrence and the size of income. The contribution of the remaining income sources to the total internal revenue was insignificant and unstable. Growth Rate of Internal Revenue: Income from internal revenue sources has shown a fluctuating trend over the review period. Accordingly, the growth trend is sometime positive and at times it is negative. The total income generated by ADDCN during 1994/95 to 2005/06 is presented below alongside the growth rate of internal revenue. (See Annex 6.5 for detailed information)

Table 6.6: Income from Internal Revenue Sources during 1994/95 to 2005/06 (Rs. in ‘000)

Fiscal Year →

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

Income from Internal Revenue Sources 603 901 1177 1335 703 1320 1331 2039 975 592 1572 1529

Growth Rate of Revenue over Preceding Year

NA* 49 31 13 -47 88 1 53 -52 -39 166 -3

Source: Financial Statements, ADDCN, 2006 * Indicates “Not Applicable”

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Growth trend of internal revenue was positive during the first 3 years after 1994/95 whereas the revenue declined during 1998/99 with a negative growth rate of 47 percent as compared to the preceding year. The internal revenue again picked up during the next 3 years with the positive growth rates although the growth was insignificant during 1999/00 with a positive growth rate of just one percent. There was a decline again during 2002/03 and 2003/04 which was followed by a substantial increment in revenue with a growth rate of 166 percent during 2004/05. It again declined marginally during 2005/06 with a negative growth rate of 3 percent. Reasons for Negative Growth Rates: Substantial fall in the income from membership fee as compared to the preceding year was the principal reason responsible for the negative growth rate of total internal revenue that occurred in all the years except 2003/04. Year 2003/04 was, however, unique in the sense that lack of contribution from consultant/staff caused decline in the internal revenue during the year although the membership fee had shown a minor increment during the year as compared to the year before. In fact, there was a significant contribution of Rs. 537 thousand during 2002/03 from this source which became nil during the subsequent year. The non-existence of elected local bodies at the districts with effect from 2002/03 was probably the main reason for the lower collection of membership fee from DDCs. Staff/consultant contributed to the internal revenue of ADDCN continuously starting from 1995/96 except during 1996/97 and 2003/04. Year 1996/97 did not see a negative growth of internal revenue mainly because MLD grant of Rs. 500 thousand more than compensated the shortfall in internal revenue caused by the non-contribution from the staff/consultant. Although there was a marginal increment in revenue from membership fee during 2003/04 as compared to the preceding year, it could not make up for the loss of revenue to the extent of Rs. 537 caused by the failure of staff/consultants to contribute anything towards the internal revenue. C. Income from Project/Program Cost: The contribution of income from project/program cost is around 42 percent of the total sources of fund of ADDCN for the period of 1994/95 till 2005/06. This percent, however, came down to 34 percent when the period of post DASU support to ADDCN is only considered. (Refer Table 6.1 and 6.2) A summary of total income earned by ADDCN through the performance of programs/projects to various donor and other agencies during 95/96 to 05/06 is provided in table 6.7 below. (See Annex 6.6 for more details)

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Table 6.7: Total Income Earned by undertaking Programs/Projects during 1995/96 to 2005/06 (Rs. in ‘000)

Fiscal Year Total Receipt from the Project/ Program

Growth Rate (%) in Receipt as compared to

Year Before

Number of Projects/ Programs

Cost Received per Project/ Program

95/96 314 Not Applicable 1 314 96/97 3,198 918 9 355 97/98 8,053 152 5 1,611 98/99 6,155 (-) 24 11 560 99/00 6,011 (-) 2 7 859 00/01 4,044 (-) 33 8 506 01/02 10,151 151 11 923 02/03 2,435 (-) 76 6 406 03/04 2,924 20 5 585 04/05 1,093 (-) 63 4 273 05/06 11,055 911 6 1,843 Total: 55,433 73 759

Source: Financial Statements, ADDCN, 2006

The table reveals that the ADDCN earned between Rs. 314 to Rs. 11,055 thousand during these years by undertaking these projects/programs. The lowest income of Rs. 314 thousand was earned during 95/96 where only one project/program could be undertaken. The highest revenue of Rs. 11,055 thousand was realized during 05/06 by undertaking 6 projects. Growth Rate of Revenue: A fluctuating trend of positive and negative growth of revenue from this source could be observed from the table. The negative growth rate of revenue occurred during the years 98/99 and it persisted till the year 00/01. The negative trend of revenue growth from this source again reemerged during the years 02/03 and 04/05 as well. Number of Projects/Programs Undertaken: ADDCN undertook a minimum number of project/program (1) during 95/96 whereas the highest number of projects (11) were undertaken during 98/99 and 01/02. The size of the project on the basis of cost received per project/program was highest during 05/06 (Rs. 1,843 thousand) followed by the year 97/98 with Rs. 1,611 thousand per project/program. The size was the lowest during 04/05 when it was Rs. 273 thousand per project/program. 6.3 Trend and Pattern of Expenditure A. Expenditure from Internal Revenue: Total share of expenditure from internal revenue of ADDCN is about 11 percent of the total expenditure of ADDCN during fiscal year 1994/95 through 2005/06. This percent just exceeds 7 percent when the period of post Danida support to ADDCN is only taken into account. (Refer Table 6.3 and 6.4 above) The total expenditure incurred in various expense items from internal revenue of ADDCN during the period 1994/95 to 2005/06 is presented below in Table 6.8. (Refer Annex 6.7 for detailed information)

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Table 6.8: Expenditure Incurred from Internal Revenue Sources during 1994/95 to 2005/06

(Rs. in ‘000)

Fiscal Year → 94

/95

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

Total Expenditure 283 1203 1006 2103 1388 884 1313 1649 1782 624 129 1246

Growth Rate of Expenditure over Preceding Year

NA 325 -16 109 -34 -36 49 26 8 -65 -79 866

Source: Financial Statements, ADDCN, 2006

* Indicates “Not Applicable”

Trend of Expenditure from Internal Sources: A fluctuating trend of expenditure from internal sources is visible from the table. It was the lowest in the year 04/05 at Rs. 129 thousand whereas the maximum amount of Rs. 2,103 thousand was spent from this source during the year 97/98. A general downward trend thereafter with slight increment in some years was perhaps the result of funding support provided by Danida with effect from 98/99. The discontinuance of DASU support from December 2005 was perhaps the principal reason for the expenditure from internal revenue of ADDCN surging up by a massive positive growth rate of 866 percent during the year 05/06. B. Expenditure from Income of Project/Programs: Income from project/programs share about 40 percent of total expenditure of ADDCN during fiscal year 1994/95 through 2005/06. This percent declines to just 33 percent when the expenditure figures of the period relating to post DASU support to ADDCN is only taken into consideration. (Refer Table 6.3 and 6.4 above) Total expenditure incurred by ADDCN in various expense items from the income of projects/programs during the period 1995/96 to 2005/06 is presented below in Table 6.9. (Refer Annex 6.8 for more details)

Table 6.9: Expenditure from the Income of Projects/Programs during 1996/97 to 2005/06 (Rs. in ‘000)

Fiscal Year → 96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

Total Expenditure 3859 6120 6563 5211 3835 8462 3258 2018 1416 10211 Growth Rate of Expenditure over Preceding Year

NA* 59 7 -21 -26 121 -61 -38 -30 622

Source: Financial Statements of ADDCN, 2006

* Indicates “Not Applicable:

Trend of Expenditure from Income of Projects/Programs: A fluctuating trend of expenditure from the income of projects/programs could be seen from the table. It was the lowest in the year 04/05 at Rs. 1,416 thousand whereas during the year 05/06, maximum of Rs. 10,211 thousand was spent from this source. A closer look of Table 6.7 along with

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Table 6.9 indicates that the expenditure from this source more or less matches with the increase/decrease in revenue from this source. Expenditure in some years was found deferred to the subsequent year although revenue generation had already taken place during that year. 6.4 Issues regarding Financial Sustainability of ADDCN: After DASU came up to provide financial support to ADDCN starting from 26 March 1999, the increasing reliance of ADDCN to DASU’s funds has become obvious. During the post DASU funding support period, DASU grant shared as much as 59 percent of the total expenditure of ADDCN. (Refer Table 6.4) The internal revenue of the ADDCN is being put to a severe pressure after the discontinuance of financing by DASU is quite evident from the fact that expenditure from internal revenue grew by a massive 866 percent during the year 2005/06 as compared to the year before. The internal revenue and savings of ADDCN can not sustain such a pressure for a long period. Over the period of its existence numbering some 12 years, the performance of ADDCN in the matter of raising of revenue from internal sources is not up to the mark. The annual growth rate of internal revenue is less than 14 percent as is evidenced by the revenue of Rs. 603 thousand in the year 1994/95 and Rs. 1,529 thousand during 2005/06. This performance of an agency which should endeavor to mobilize maximum resources in order to become self-reliant to the extent possible to carry out major part of its activities through own resources can not be considered satisfactory. Internal auditors’ training fee is one item in the internal revenue of ADDCN which appeared in the income statement of ADDCN for the last three fiscal years. Apart from this, little effort was made by ADDCN during the period to increase its revenue base and in identifying and adopting new sources of internal revenue. There could be a number of areas like this wherein ADDCN could utilize its expertise and resources to provide services to the local bodies at the district level and earn handful of revenue from the services provided. Starting from fiscal year 2001/02, ADDCN has fixed a three tier system of levying membership fee to member DDCs with an annual membership fee of Rs. 10,000 to DDCs of Group A districts, Rs. 15,000 to DDCs of Group B districts and Rs. 20,000 for DDCs of Group C districts. The districts were categorized based on the annual income earned by the DDCs at that time. DDCs representing Group A districts were having annual income below Rs. 1 million whereas DDCs of Group B district had annual income between Rs. 1 to 5 million. The DDCs of the third category were having annual income in excess of Rs. 5 million. The membership fee has not been revised since then. At present, some terai DDCs as well as some in the valleys have income in excess of Rs. 20 million per annum. The clubbing of DDCs having high annual income in excess of Rs. 5 million in the same bracket does not appear rationale and equitable. To say the least, it is unfair to ask DDCs which earn just in excess of Rs. 5 million to pay the same membership fee along with DDCs which earn more than Rs. 30 million per annum. During the period of 1995/96 to 2005/06, ADDCN earned revenues to the extent of Rs. 5.54 million by undertaking projects/programs of donor and other agencies. To accomplish such projects/programs, ADDCN spent funds to the extent of Rs. 5.10 million. On an average, the expenditure was 92 percent of the revenue earned and there was a saving of 8 percent to the benefit of ADDCN. Such a saving is considered to be on the lower side.

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CHAPTER SEVEN

SOME KEY ISSUES AND DONOR'S SUPPORT

7.1 Key Issues Analysis of the functioning of ADDCN reveals that the resolution of the following issues may strengthen the capability of the association to better serve its client and represent member interest for a democratic local governance system in the country.

7.1.1 Financial Sustainability ADDCN is facing big challenges of its sustainability. The revenue base at present is too small and more over it is too uncertain. A heavy dependence on the external donor support even for the recurrent nature expenditures pose a threat that it may crash-land once it fails to get external support. Attempt should therefore, be made to make it less dependent on such external assistance, particularly on recurrent expenditures. Avenues should be explored to find more secured internal resources. It should be kept in mind that such internal resource base should be as broaden as possible. The broad resource base will, on the one hand, make the resources predictable with less vulnerability due to some ups and down in the resource base and on the other, give lesser burden to a single base ensuring possibility of consent by the base owner. Following issues on financial sustainability are worth mentioning:

Historically, ADDCN has been placing less importance to internal resource mobilization;

Over dependency on donor support; Expansion of activities without properly assessing their importance to

Organizations objectives; Creation of staff position without proper justification; and Lack of vision on the long term sustainability plan

Suggestive Measures for the Sustainability of ADDCN A. Scaling Down and Rationalizing Activities

In view of the discontinuance of DASU financial support, ADDCN is put in a precarious situation wherein scaling down of the present level of activities and rationalizing it appears to be the only plausible solution and logical option before it. B. Rationalizing the Staff Positions to Reduce the Fixed Cost Burden

After the discontinuance of DASU's financial support, challenges lie ahead to make ADDCN financially sustainable and viable. ADDCN should seriously exercise on rationalizing the existing organogram and staff positions. Outsourcing of service currently being performed by the ADDCN permanent staffs could be another option.

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C. Augmenting Internal Revenue Base and Sources

Avenues should be explored to find more secured internal resources. It should be kept in mind that such internal resource base should be as broaden as possible. The broad resource base will, on the one hand, make the resources predictable with less vulnerability. D. Revision of the Rates of Membership Fee

There is a scope for revising the existing membership fees. The membership fee appears to be unjust and unfair to the DDCs just crossing the threshold of annual revenue of Rs. 5 million as compared to the DDCs earning many times more. The rate should be so revised so as to make it fair and just. E. Enhancing Level of Contribution from Projects/Programs

Lower level of saving from the undertaking of projects/programs is yet another issue ADDCN should conduct surveys and studies to determine the margin of saving which similar other agencies are able to secure from such activities. Based on findings and results of such surveys and studies, ADDCN should take appropriate policy decisions and procedural measures to ensure that the agency enjoys the benefit of reasonable return out of the projects/programs undertaken by it. F. Support from the Government and Member DDCs

As noted earlier, ADDCN is a political body and it's activities mainly benefits member DDCs and the government. Activities relating to sound legislative framework for decentralization, human resource development and MIS system strengthening etc., enhances capacity building at the local level resulting to more authority for better service delivery. With more authority on resource mobilization it can serve its people better by executing number of projects that help improve the life of the people. Similarly, with more grass root level activities carried out efficiently at the local level with less claimant on central level resources by the local bodies, the central government can invest more on sector that ensure human development and well being of the people and thus get more credit for it's performance , nationally and internationally. It is therefore, necessary that the member DDC and the government come forward and contribute for ADDCN's financial sustainability. Member DDCs can agree to share an agreed percentage of its own source revenue, shared revenue and the unconditional grants it receive annually from the government. Government, on the other can provide an annual grant to ADDCN for the services it provides in strengthening decentralization and may also transfer the budgetary provision of DDC level training etc., to ADDCN so that it coordinate and conduct training as demanded by DDCs. Such resource contribution by DDC and the government will permanently ensure financial sustainability of ADDCN, at least for its recurrent expenses and some activities to lobby decentralization as well as strengthening capability of DDCs.

44

G. Exploring possibility of tapping other resources

As the existing sources of revenue is not sufficient to generate sizable revenue to ADDCN, it is recommended that some potential revenue sources be explored and tapped for achieving financial sustainability. Serious consideration of tapping these resources will help ADDCN to financially sustaining at least for its recurrent expenses and also for carrying out normal activities. The field level discussion and the past elected chairman and members of different DDCs unanimously said that they want to see strong ADDCN with more supportive role to member DDCs in the future. In these discussions, they acknowledge the role of DDC in enhancing revenue base of DDCs and as such shows their willingness to share their own revenue and government transfer with ADDCN. As such, ADDCN should explore the possibility of sharing some of these revenue sources. Some of the potential areas worth exploring for generating revenue could be: a. Share a fixed % (say ½ to 1 %) of DDC internal revenue

As ADDCN has played crucial role in revenue assignment of government to LBs, and also in developing formula for revenue distribution among the stakeholder from hydro power etc., DDCs in most cases, are found willing to share a nominal percentage of their own revue to ADDCN. In such a situation, ADDCN should explore the possibility of sharing say 1/2 to 1 percentage of DDCs own revenue. In return, ADDCN can also propose to carry out studies and training of DDC officials to improve revenue base and effective collection of DDC revenue. ADDCN can collect a significant amount of resources from this source alone. Besides, such source will be permanent in nature.

b. Share a fixed percentage of (say 1 % ) of Government Unconditional grants to DDC

This is another area where ADDCN should explore and try to get consent from its member DDC. Here again, discussion with DDC officials and past elected officials shows willingness to share such grants with ADDCN.

c. Share fixed % of hydro power, forestry or tourism income etc.

These are common resources of central government and respective district where it is located or the catchments and affected districts. Here again, ADDCN in the past has helped resolve the problem of sharing royalty/revenue generated from the project or use of the property by developing a revenue sharing formula. DDCs acknowledge it and as a token of their appreciation are willing to share part of the revenue they collect from this sources.

d. Membership fee hiked in proportion to revenue

This is another area for improving revenue of ADDCN. This may be another way of sharing DDC revenue as discussed in section (a). e. Ask government to provide all Lbs training budget, coordinate training- training fee as

source of revenue

This is something which ADDCN has to request to the central government. Most of the DDCs or the ex-elected officials does not agree with this option as this may increase the chances of government intervention in the association and ADDCN may loose its independence.

45

f. Other fees, study etc.

Besides these, there may be several other alternative sources of revenue for improving the financial sustainability of ADDCN. What is needed is a serious thinking, on the part of ADDCN executive committee and the officials, to improve revenue base of the association. The urgency of finding alternative resources may force ADDCN to look at all possible sources of revenue and work out the modality to mobilize it. 7.1.2 Political Neutrality Although, the association is a political body providing leadership in lobbying for a faster pace of decentralization in Nepal as well as in supporting capability enhancement of it's member DDCs so that it is able to take up the assignment devolved to it by the central government. The credibility of the association lies on making politically impartial decision. To ascertain it, it is desirable that the chairman and the leadership remain politically neutral. The organization should be able to make decisions that are free from any of the political party's agenda. Only in that situation it can fight for its commitments. Failing this will limit the confidence of it's members for taking up issues important to ADDCN and it's functioning but may be against the belief of the political party that the leadership is align with. Such political bias will moreover, limit its pro-active role on the issues of decentralization. Lack of common and explicit political decision of different parties constrained ADDCN to make proactive decision. ADDCN seems to be very much cautious on this issue and from it's very inception, it has made a provision to nominate all political party which have been elected in the DDC to represent in the executive committee. The vice-chairperson of ADDCN is offered to the representative of the second largest party in the DDC. However, in recent year, the stakeholders – member DDC and others including donors are found increasingly feeling a political bias – party politics getting prominence - in the functioning of ADDCN. The passive move of ADDCN in providing alternative to activate local body is sighted as one such example of political bias. 7.1.3 Relationship with member DDCs ADDCN, as of now, is projecting itself as a club of the politically elected DDC representative. The annual convention of the 300 member council is the only occasion when a member DDC can ventilate its problems and issues. There is no provision of a technical level committee between ADDCN and member DDCs that ensure institutional relationship between the two. This has created a big gap between the two specially, when there are no elected members at the DDC. Lack of institutional relationship between ADDCN and member DDCs have found failing in generating a sense of common ownership of ADDCN and its activities. This calls for appropriate changes in the existing ADDCN constitution to provide room for strengthening institutional relationships between the two institutions. With no council meeting since 2001, there is virtually no way to communicate between ADDCN and the DDCs. A close analysis of the payment of annual membership fee by DDCs shows that the number of DDCs not paying annual fee has increased since 2001. DDCs are not keen to pay the dues. ADDCN should put serious efforts to collect the membership arrears. Similarly, the number of activities conducted by ADDCN for DDCs has also gone down significantly over these years. These examples clearly shows that with

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the expiry of the elected personnel in DDC – the only source for ADDCN relationship – the relationship between ADDCN and it's member DDCs has gone down sharply. This justifies a need for technical level relationship between the two. 7.1.4 Ambiguity in Donor Policy Since its very inception, ADDCN has remained dependent on donor support. It received large amount of support, both hardware and software, for a variety of activities annually for a number of years. This has really helped in enhancing capability of ADDCN in influencing operationalization of decentralization policy, and contributed in formulating Act and Regulation, preparation of a variety of draft manuals, local services act, code of conduct and training of manpower at the DDC etc. Lately, donors have also raised voice against the seemingly politically biased attitude and decision of ADDCN. Donors wanted more a politically neutral ADDCN that can fight for a smooth decentralization process in the country. This calls for a strong ADDCN – strong at the professional and technical level. Therefore, more support is required to train as well as retain the professional manpower in ADDCN. But, most of the donors stopped its support sighting absence of elected leadership. It should, however, be noted that the Danida mission of 2005 though recommended to scale down the activities of DASU, has actually pledged continued support to ADDCN. In the changed political situation where the absence of elected representatives in the local bodies has been a major issue among the donors' community Danida's continued support was very much encouraging for strengthening the process of decentralization in the country. A professionally strong ADDCN with good institutional relationship with it's member DDC can contribute more for decentralization and also in minimizing political bias in its activities. Therefore, donors are requested to continue its support on activities that strengthen ADDCN capability. 7.1.5 Future Structure of ADDCN Nepal is now in a great transition phase. With the new constitution in the offing, the overall governance system is undergoing a massive change. At this point of time, it is difficult to pinpoint the kind of governance system Nepal soon will have. A change in the present governance structure may result ADDCN redundant and as an alternative, a more comprehensive and wider scoped "Local Government Association" might takes it's place. This will also replace Municipality Association and Village Development Committee Association as well. Such transformation in Local Government Association will not only increase it's scope of work but will also increase the size of it's resource base for it's effective functioning. A clear cut decision has not yet been made on this. However, there seems to be two schools of thought on the future governance structure. One, which carries the mandate, of course with slight variation, of UML, Maoist and some civil society is for a federal system of governance, with Nepal divided in to 7 to 9 federal states having autonomy except for foreign relations, money and exchange rate and defense. Such federal system perhaps will have no rooms for a district but there will be municipalities and VDCs. Another school of thought argues for a non-federal unitary system with more autonomous districts, municipalities and VDCs. The number of districts will however be slashed down to 40 or 50 and the number of VDCs about 1000 but municipalities increased to 100 plus. In this model, all the district level offices including judiciary and police for law and order will be under the umbrella of DDC and it will have authority to tax and use resources.

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In any case, it seems worthwhile to seriously consider Local Government Association for promoting decentralization, safe-guarding the interest of local bodies, and for better relationship with the central government and the outside world. 7.2 ADDCN’s Unfinished Agenda There are some unfinished activities that ADDCN should have to continue in the coming days. The completion of these activities is expected to help achieve the envisioned outputs of ADDCN. From that perspective these activities need to be supported in the short term A. District Documentation and Information Center (DIDC)

ADDCN strongly lobbied for the formation of such center in DDCs. It has prepared a working manual to strengthen DIDC and the manual has been piloted in Morang and Kaski. It has been found very successful and wanted to replicate in all the districts. The steering committee has also endorsed this plan. It has been argued that this IMS project is very essential for the capacity strengthening of the DDC. As one of the expected out put of ADDCN activities is to strengthen the capacity of DDC the funding support for this project would strengthen DIDC in all the districts and thereby DDC will be further strengthened. B. Training to Internal Audit Section

IAS has been formed in 69 DDCs. The credit goes to ADDCN. This has been observed by all the surveyed DDCs. ADDCN has prepared a training manual. The official of IAS of 55 DDCs has been trained so far. 20 more DDCs are yet to be covered. One of the unfinished agenda of ADDCN is to expand this service on remaining 20 DDCs. The training was focused to Internal Auditor only. It has now been realized that in order to create a conducive environment and the cordial relationship between Accountant and Internal Auditor the training should also be provided to the accountant as well in the same time. C. Furthering Support to NaREE Unit

Natural Resources, Energy and Environment (NaREE), is one of the unit established at ADDCN. The unit is supposed to provide professional services to member DDCs and other stakeholders in the matters of natural resources, energy and environment management and planning and implementation of rural energy system and environment initiatives at local level. The Unit has been very active. Given the support available the Unit could further effectively serve the DDCs in the matter of natural resources, energy and environment management. Some other ongoing important activities of ADDCN are DDC data base management, upgrading documentation center, regular publication of periodicals -"local democracy" and bulletin. Donors support has been deemed essential to accomplish these ongoing activities. 7.3 Need for Continuing Donor Support ADDCN has been receiving a sizable assistance from donors since its very inception in 1995. With scanty resource but an ambitious mandate for rapid decentralization through awareness creation among political party and policy makers, supporting member DDC

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capacity enhancement and internationalizing Nepalese decentralization, ADDCN readily accepted the support primarily from DASU/Danida in 1995. The support continued till 2005 and with such a generous support ADDCN could establish itself as a professionally sound and strong institution devoting itself for the cause of decentralization in Nepal. It is apparent that DASU/Danida support to ADDCN has been very crucial in projecting it as a viable and strong agency committed to further decentralization in Nepal. But during it's long association with ADDCN, it seems, it never stressed on the issue of financial sustainability. The suspension or rather discontinuation of DASU/Danida assistance has actually landed ADDCN in a financial crisis. This has threatened the very existence of the association, as it is now facing tough time even to make payments for wage and salary and other day – to – day function. It has already lost some of its trained manpower and now there are only three professionals working at present. ADDCN could not make attractive retention policy. Chances are that they will also leave the institution if the situation does not improve. Considering the severe effect even in the day to day running of ADDCN, a bridging support for continuing key professional staff and regular activities was continued through Danida HUGOU for the period of three months during April to July 2006. However, the volume of such support is not enough to retain key staff and make salary payments to other core staff. Lack of resources has forced ADDCN to discontinue some of its initiatives for strengthening DDCs. Besides, it has also cut down it's manpower as well as other activities sharply. Given the importance of ADDCN in carrying forward the process of decentralization in Nepal it is highly recommended that Danida HUGOU continue its full-fledged support to ADDCN with out further delay. Other donors interested in the field of decentralization and local governance are also welcome to provide the assistance to ADDCN. Since Danida has been involved in providing the assistance for strengthening the process of decentralization in the country it should play a lead role in coordinating external development assistance. Basket funding approach, which has been practiced in other sectors of development assistance in the country, could be the possible alternatives for seeking donors support for ADDCN. However, in designing support, care must be taken that at least, the recurrent nature expenses should be borne by ADDCN through its own source. The package of such support should also focus on the issue of financial sustainability of the association meaning besides other, provision for a thorough study on the potential alternate revenue sources for ADDCN and the modality of collection. Thus, it is clear that the association needs an immediate rescue package that may include both immediate to short term as well as long-term packages. However, such support should be time bound and decelerating in nature. It is now more or less clear that the election for the local body may take place only after two to three years and until then some temporary arrangements have to made for running these local bodies. The best alternative which may work effectively at all level of local bodies might be the formation of a committee representing all active political party in the area including Maoist plus representatives of civil society, dalits or marginal class people and women. Special act should be promulgated to authorize them to carry out all function of elected members. Agreement with Maoist should also be made to dismantle their so called people's government at the grass root level. Whatever may be the modality of the local body, it is more than clear that these bodies and the ADDCN will not have a new set of elected representative for some years. It will not be a wiser decision to defer the support until then. Whatever might be the outcome, probably

49

ADDCN or some variation needs to be strengthened professionally. A professionally strong ADDCN will be able to guide and support its member DDC in its capacity building and lead decentralization process for effective service delivery to its people. Therefore, the support needs to be continued. However, such support could be designed in two phases: immediate to short term and next for a medium to long term. The immediate to short term package should a least aim to continue and accomplish the works that has been initiated in the immediate past. This will require some support such as; a. Support to retain the professionals and the key core staff; b. Support for office supplies and the logistics; c. Support for the replacement of some office equipments (there should be a plan to

completely replace/add office equipments over a period of time); d. Continuation of some unfinished tasks, such as, training of all internal auditors in the

DDCs, training financial management, implementation of MIS system and training of personnel and carry out natural resource and environmental activities;

e. Developing uniform financial regulation vis – a - vis that of government (the differences in the regulation is creating lot of problems at the DDC level), developing monitoring indicators on finance, project selection, prioritization and implementation – DFDP indicators may be used but training of personnel will be required ;

f. Conducting seminar and workshop on contemporary issues; g. Commence studies for exploring the possibility of financial contribution by member

DDCs and the government, in line with the suggestion made above, and develop a modality to achieve ADDCN's financial sustainability;

h. Support to a study on the restructuring of LGs (size of DDC, municipality and VDCs, and it's political boundary etc);

i. Support to a study on the role of local body and the way forward in decentralization in a federal system in Nepal – including the pros and cons and the strategy to mitigate the cons.

As noted earlier, because of the uncertainty regarding future governance structure, the study team finds difficulty in pinpointing the types of support required in a medium to long term framework. However, it strongly feels that such a medium to long term support package should focus more on the institutional strengthening of the association and therefore, should at least contain:

a) a support package for human resource development, both within ADDCN and it's member DDCs. Such package should consists of training programs in a variety of subject required for an autonomously running DDC,

b) study program in better performing DDC and overseas, exposure programs of officials as well as elected members;

c) Strategic development plans of DDCs; d) Co-operation and negotiation with the central government and other partners; e) Resource mobilization and resource sharing of common properties such as,

hydropower, forestry, tourism, national parks and wild life sanctuary etc; f) Drafting of necessary act and regulation providing legal base for efficiently carrying

out the autonomous function by DDC; g) Feasibility of creating a Local Government Association replacing all three

association and drafting of its constitution, rules and regulation etc

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The immediate and medium to long term support to ADDCN will definitely further consolidate the process of decentralized governance system in the country by strengthening the institutional capacity of ADDCN and member DDCs as well. 7.4 Conclusion A decade of ADDCN activities in Nepal and elsewhere, clearly demonstrated that local government associations are of crucial importance to the development of a viable local government system and as a development partner for the central government in the decentralization process. It is believed that local government associations can:

a. Promote and contribute to the decentralization process, e.g. by linking central government, local governments, donors and other actors;

b. Facilitate co-operation and dialogue between central government and local governments. In order to comply with the total public sector tasks and meet the increasing demands of the citizens, it is important that the limited public resources are used optimally;

c. Represent local government interests vis-à-vis the central government and non-governmental organizations inside and outside the country;

d. Support institutional and capacity building in the local government sector. ADDCN, with a variety of activities ranging from contribution in drafting LSGA and Regulation to lobbying for creating institution that help decentralization process and capability development at DDCs. has been very successful in contributing the above mentioned widely believed agenda. Presently, the issue of restructuring of the State and new constitution making through constituent assembly are top priority agenda of the nation. ADDCN has already initiated its activities to influence the whole process of restructuring and constitution making. But the task it has initiated is still unfinished. In order to fulfill the current tasks satisfactorily and to facilitate further devolution of task, it is necessary to upgrade its capacity to:

a. Co-ordinate DDC activities and inter-DDC initiatives, e.g. on environmental protection or facilitation of private sector development;

b. Facilitate exchange of experience of best practices among local governments; c. Gather and distribute important information to local governments; and d. Formulate a new local governance legislation in accordance with the upcoming

new state structure The support to associations like ADDCN is not only to the benefit of the local governments. It can also be valuable to the central government and the overall democratization and decentralization processes.

*********

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Reference

ADDCN Strategic Plan, 2001, Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, "Local Governance Manual", Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, "Occasional publication 'ADDCN Bulleting”, Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, "Restructuring of State and Social Inclusion", Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, 2004, "Annual Income and Expenditure Report of DDCs 2004", Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, 2004, "Code of conduct of Local Representatives 2004", Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, 2005, Local Democracy 2005, Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN, 2004, Decentralization and Advocacy for Good Governance (in Nepali), Association of District Development Committees of Nepal, Lalitpur, Nepal ADDCN's Annual Progress Reports of various years ADDCN's Statute, Bylaws, Regulations ADDCN 2002, "Basis of Good Governance: Local Self-Governance ADDCN A Brief Introduction to Association of District Development Committees of Nepal", ADDCN, Lalitpur, Nepal ADDCN 2001, "Decentralization in Nepal: Prospects and Challenges-Finding and Recommendations of Joint HMGN-Donor Review", ADDCN, Lalitpur, Nepal DASU/Danida: Annual Progress Report of various years Law Books Management Committee, 1999, "Local Self-Governance Act, 1999", His Majesty's Government of Nepal. Law Books Management Committee, 1999, "Local Self-Governance Regulation 1999 and Local Bodies (Financial Administration) Regulation, 1999", HMGN Local Bodies' Fiscal Commission, 2001, "Report of the Local Bodies' Fiscal Commission, HMGN", Local Bodies Fiscal Commission Secretariat, Kathmandu.

Annexure

Annex 1.1

Performance Assessment of Association of District Development Committee in Nepal

(ADDCN) DanidaHUGOU And PRAD Nepal

Checklist for DDC Officials Name of the DDC: Person Interviewed: Position: Date of Interview:

Membership A1. Is your DDC the member of ADDCN? A2. When did you obtain the membership?

Membership Fee B1. How much did you pay membership fee? B2. When did you last pay the fee? B3. Why are you not paying it regularly? B4. Is there any system of penalty or late fee? B5. Do you consider the membership fee high/moderate/low? B6. What is your view on the prevailing structure of membership fee? Is it a good approach? Or it needs restructuring/rethinking?

Professional, Technical and Training Support C1. Was your staff trained by ADDCN? C2. In what area your staff received training? C3. How often such trainings were conducted? C4. How helpful it was in strengthening the HRD Center of your DDC? C5. Did you receive any other support from ADDCN? C6. What kind of support you obtained? C7. Did your DDC prepare PDDP? C8. Did you seek any support of ADDCN for preparing PDDP? C9. List the kind of support you receive from ADDCN

Communication Linkages D1. Do you know that ADDCN has developed a website? D2. How often do you access to that service? D3. If not why you do not make use? D4. For what purpose you access? D5. Do you find it updated? D6. What problems you have experienced in accessing the service?

Statute and By-laws E1. How appropriate its statute and by-laws to represent all DDCs in the country?

E2. Do you feel the need of any amendments? If yes in what respect amendments required?

Role of ADDCN F1. How do you evaluate the role and responsibilities discharged by ADDCN in promoting decentralized governance system and strengthening the LBs in Nepal? F2. Do you consider it being successful in safeguarding the interest of the member DDCs? If not why? F3. What is the relevance f ADDCN in the change context? F4. How ADDCN could be made more effective in fulfilling its responsibilities?

Annex 1.1 Continue…….. Performance Assessment of

Association of District Development Committee in Nepal (ADDCN) DanidaHUGOU And PRAD Nepal

Checklist for former Elected Representatives of DDCs

Name of the DDC: Date of Interview:

Performance of ADDCN As a lobbyist/pressure body for promoting decentralization in Nepal. What do you think the major achievements by ADDCN in decentralization since it's establishment? As an institution exposing Nepal's decentralization approach/status at the international level. As an agency supporting DDC capability enhancement and Human resource development As an agency influencing government decision making on decentralization including devolution of tasks and function and fiscal decentralization, and also in establishing Fiscal commission, local government training center etc. As an agency helping mobilize local people in different local /national programs etc.

ADDCN's role in developing Human resources at DDC by conducting/coordinating different training programs that help increase DDC capability.

ADDCN 's contribution/ support in preparing decentralization act and regulation, guidelines and District Periodic Plan

ADDCN's role in identifying local resources and mobilization/training of manpower to mobilize these resources at the local level

ADDCN's role in mobilizing/coordinating foreign aid in DDC ADDCN's organizational structure, function and responsibility in the changing

context. Continuation of present system Federal system or any other system ADDCN's technical support and feed back to DDC and government ADDCN and DDC communication network etc. Making ADDCN financially sustainable

Membership fee increment Increasing service charges Sharing DDC revenue in fixed percentage term Sharing government transfer to DDC at a fixed percentage Direct annual contribution by government Government transferring all training job /resources to ADDCN Others

Suggestion on ADDCN council and executive committee - size, composition and process of selection/election.

Challenges faced by DDC and ADDCN's

Annex 1.1 Continue…….. Performance Assessment of

Association of District Development Committee in Nepal (ADDCN) DanidaHUGOU And PRAD Nepal

Checklist for ADDCN

Person Interviewed: Position: Date of Interview: 1. How democratic is the constitution and the formation procedure of ADDCN? 2. To what extent your institutional capacity has been strengthened? 3. Are your institution is now fully equipped to attain your strategic goals? 4. If not in what area your institutional capacity should be further strengthened? 5. Do you think ADDCN has been successful in safeguarding the interest of DDCs? 6. To what extent you have been successful in your role of advocating decentralized

governance system and strengthening the role of Lbs. in the country. 7. If not fully then what are the problems your have confronted? 8. What do you suggest to overcome the problems? 9. What is your sustainability plan? 10. Please provide following information (sheet attached) to assess your sustainability

plan. Check list for Financial Sustainability of ADDCN

Information and Documents Needed from ADDC/N to appraise financial sustainability:

Income and expenditure account of ADDC/N for fiscal year 1995/96 to 2005/06 Balance Sheet of ADDC/N as at the end of FY 1995/96 to 2005/06 Detail Breakdown of Income Sources of ADDC/N for the above FYs in terms of: Annual Membership/Renewal Fee Grant from each source of funding indicating: Funds received from individual internal source Grants received from external donor/s Income from other sources indicating the type of income and amount of income Total Income from Consulting Services Provided

Detail Breakdown of expenditure incurred by ADDC/N during the above fiscal years in terms of:

Regular Staff Expenses by individual expense items Office operating expenses by individual expense items Other operating expenses by individual expense items Expenditure on consulting services provided: Remuneration of Consultants Other Costs by individual expense items List of Consulting Services undertaken by ADDC/N during the above FYs

specifying:

Name of consulting assignment undertaken Consulting fee received Expenses incurred in each consulting assignment by expense type Start and Completion date of individual consulting assignment Staff Positions – Approved, Fulfilled and Vacant Rate of Salary, Allowance and Perquisites by individual Staff Position Annual Membership Fee Structure Established over the years Financial Regulation of ADDC/N Plan, if any, for the reduction of staff positions

Annex 1.2 List of Person Participated in the Interaction Meeting at ADDCN

S.N. Name Designation 1. Mr. Krishna Prasad Sapkota Chairman 2. Mr. Madhav Poudel Ex- Chairman, ADDCN 3. Mr. Bharat Bahadur Khadka Executive Committee member 4. Mr. Lal Kumar K.C. Executive Committee member 5. Mr. Man Prasad Khatri Ex-Chairman, DDC Bajhang 6. Mr. Hem Raj Lamichhane Executive Secretary General 7. Mr. Parashu Ram Upadhyaya LG Legal Expert 8. Mr. Rajesh Babu Shrestha LG Finance Expert List of Person Participated in the Interaction meeting at DDCs

S.N. DDCs Designation & Office A. Kavre DDC 1. Mr. Dhurba Raj Planning Officer 2. Mr. Dhan Bahadur Basnet Internal Auditor, Internal Audit

Division 3. Mr. Bidur Gautam Ex-Member 4. Mr. Prahlad Pyakurel Information Section 5. Ms. Maya Wade Women Division Chief 6. Mr. Taranath Banjara Account 7. Mr. Pushpa Ratna Ranjit Acting L.D.O. B. Kaski DDC 1. Mr. Shree Nath Baral Ex-Vice Chairman, Kaski DDC 2. Mr. Him Lal Baral Ex-Member, Kaski DDC 3. Mr. Gopal Giri Ex-Member, Kaski DDC 4. Mr. Ganesh Gyanwali LDO 5. Mr. Ramesh Koirala Program Officer 6. Mr. Lal Bahadur Thapa Account Officer 7. Mr. Guru Dutta Pande Executive Secretary 8. Mr. Tilak Bahadur Chhetri Planning Chief 9. Mr. Ram Nath Upadhyaya Internal Audit Chief C. Syangja DDC 1. Mr. Shiva Adhikari Ex-Chairman, Syangja DDC 2. Mr. Ram Bahadur Thapa Ex-Chairman, Syangja DDC 3. Mr. Laxmi Prasad Poudel Ex-Vice Chairman, Syangja DDC 4. Mr. Hom Nath Sharma Acting LDO, Chief Planning division 5. Mr. Narayan Prasad Shrestha Chief District Technical Officer 6. Mr. Dhana Prasad Koirala Planning Officer 7. Mr. Gyan Prasad Aryal Account Chief 8. Mr. Yam Prasad Regmi Administration Chief 9. Mr. Guru Prasad Dhakal Chief, Information Section D. Lalitpur District 1. Mr. Madhav Poudel Ex-Chairman, Lalitpur DDC 2. Mr. Surendra Mohan Sharma Ex-Vice Chairman, lalitpur DDC

3. Mr. Krishna Man Lama Ex-Member, Lalitpur DDC 4. Mr. Rom Lal Maharjan Ex-Member, Lalitpur DDC 5. Mr. Kedar Kumar K.C. Ex-Member, Lalitpur DDC 6. Mr. Jeevan Khadka Ex-Member, Lalitpur DDC 7. Mr. Damodar Khadka Ex-Member, Lalitpur DDC 8. Mr. Mukunda Dahal Bhattedada V.D.C 9. Mr. Dandu Raj Ghimire Local Development Officer, Lalitpur 10. Mr. Navaraj Bista Program officer 11. Mr. Thamnath Dhakal Accountant, Account Section E. Jhapa District . Mr. Arjun Rai Ex-Chairman, Jhapa DDC 2. Mr. Yubraj Ex-Member 3. Mr. Bam Bahadur Karki Ex-Member 4. Mr. Prakash Chandra Ex-Member 5. Ms. Pabitra Kharel Ex-Women Member 6. Mr. Rohani Jha Ex-Member 7. Mr. Somraj Rai Ex-Member 8. Mr. Sital Prasad Gupta Acting LDO 9. Mr. Prakash Chaudhary Program Officer 10. Mr. Khemani Kafle Planning Officer 11. Mr. Som Thapa Internal Auditor F. Morang District 1. Mr. Khadak Bahadur Basnet Ex.-chairman, Morang DDC 2. Mr. Khila Nath Dahal Account Officer 3. Mr. Chandra Prakash Sigdel DDC Advisor 4. Mr. Pitambar Vasti Internal Auditor 5. Mr. Mahendra Khadka Program Officer 6. Mr. Khageshor Kafle Administration G. Banke District 1. Mr. Om Jung Rana Ex – Chairman, Banke DDC 2. Mr. Milan Sapkota Member-UML 3. Ms. Gita K.C. Member-Congress 4. Mr. Ramesh Kumar Chaudhary Member- RPP 5. Mr. Mustafa Kabadiya Member- RPP 6. Mr. Sarad Kumar Podel Program Officer 7. Mr. Ram Krishna Panthi Account Officer 8. Mr. Tek Raj Aryal Planning Officer H. Bardiya District 1. Mr. Bip Bahadur Rana Ex – Chairman, Bardiya DDC 2. Ms. Bina Sawali Ex-Women Member, Bardiya DDC 3. Mr. Krishna Khanal Ex – Member, Bardiya DDC 4. Mr. Shom Sawali Ex - Women Member, Bardiya DDC 5. Mr. Bhesh Raj Kafle Ex – Member, Bardiya DDC 6. Mr. Kul Prasad Pokharel Ex - Member, Bardiya DDC 7. Mr. Indra Prasad Luitel Ex – Member, Bardiya DDC

List of people interview/discussed

S.N. Name Designation & Office 1. Mr. Ivan M. Nielsen Program Coordinator, DanidaHUGOU 2. Dr. Hikmat Bista Senior Advisor, DanidaHUGOU 2. Mr. Bandhu Ranjan Advisor, DanidaHUGOU 3. Mr. Bishnu Puri National Program Manager, DFDP 4. Mr. Mangal Das Maharjan Program Chief, Renewal Energy Program 5. Mr. Surya Kumar Sapkota Planning Officer, Renewal Energy Prog. 6. Mr. Rudra Sapkota Senior LG Expert, SNV 7. Mr. Bishnu Adhikari GDO, USAID 8. Mr. Raj Babu Shrestha CEO, Poverty Alleviation Fund 9. Mr. Ram Thapaliya Physical Engineering Officer, RAP 10. Mr. Shankar Pokharel Officer social sector, RAP 11. Mr. Bhupendra Bahadur Basnet Program co-ordination, DRSP 12. Mr. Khem Raj Nepal Chairman, Inlogos 13. Mr. Krishna Lal Sapkota Founder chairman, ADDCN 14. Mr. Shushil Gyawali Executive Secretary, MUAN 15. Mr. Mukti Rijal IGD 16. Mr. Sarad Neupane Assistant Resident Representative, UNDP 17. Mr. Mahesh Dahal Under Secretary, MoLD 18. Mr. Bhim Dhungana General Secretary, NAVIN

Annex 2.1 ADDCN Organogram

Council

Executive Committee

Executive Secretary General

Administration and Finance Unit

Institutional Development/Human

Resource Development Unit

Legal Support Unit

Resource Pool

Local Government Finance Unit

Program and Planning Unit

Natural Resources, Energy and Environment Unit

Sectoral Service Unit

Information Management Unit

Annex 4.1

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA 1 Promotion of

decentralization & Local governance

Lobbied for decentralization acts and enacted LSGA and regulations

Enactment of LSGA, & Regulation

LSGA, & Regulation has come by the effort of ADDCN Devolution of Essential services including full scale devolution

Provided input in the formulation of the act. Involved in formulating regulations & directives

Contributed to bring LSGA, & Regulation

Contributed to bring LSGA, & Regulation

Enactment of LSGA, & Regulation Devolution of Essential services including full scale devolution; Fiscal decentralization resulting to change in financial regulations giving power to DDC to impose new tax areas

Enactment of LSGA, & Regulation Devolution of Essential services including full scale devolution Article 212 of LSGA provisioned the formation of DIDC; Instrumental in making such provision in the Act

2 Support to DDC’s capacity enhancement and HRD

Supported in capacity building

DPP Manual prepared and made available; assisted in the preparation of DPP

Technical support provided while preparing DPP DPP Manual prepared and made available DDCs planning & management capabilities has enhanced Resource bas e of DDCs have widened tremendously

Conducted training on capacity building and assisted in preparing DPP

DDCs planning and management capabilities has enhanced; Conducted training on renewable energy

DPP training provided; DPP not yet prepared

Technical support provided while preparing DPP DPP Manual prepared and made available DDCs planning and management capabilities has enhanced Resource base of DDCs have widened tremendously

Technical and financial support (Rs 70,000) obtained while preparing DPP; 3 staffs received 7 days “Local Facilitator” training in DPP preparation; DPP Manual prepared and made available; DDCs planning and management capabilities has

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA enhanced; On HRD ADDCN provided training to elected representative which is not a good strategy rather the regular staffs be trained Can also organize some innovative training for LBs

3 Social mobilization

Coordinated health related program effectively

Active in social mobilization program specially national health programs

Partnered with UNICEF in carrying out program of “social mobilization through local governance” event such as Vitamin A , Leprosy, National Immunization day etc very effective program

Activated all the DDC representatives in national social events

Mobilized DDC in national level programs specially health programs

Created environment to make the program successful

Partnered with UNICEF in carrying out program of “social mobilization through local governance” event such as Vitamin A , Leprosy, National Immunization day etc

Polio eradication prog. very effective role of ADDCN

4 Organizational structure

Present structure is okay

Make slim structure Strengthen

One Local Bodies Association could be the appropriate approach rather than a separate one for each

Present structure is okay

Present structure is okay; ADDCN can play a lead role in State Re-structuring Process. Make slim structure

Cut down the size of council.

Present structure is okay. No need for amendment Pioneer in SAARC countries to institute such an inclusive structure where room for all party representation has been guaranteed

One Local Bodies Association could be the appropriate approach rather than a separate one Existing number

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA secretariat of districts,

municipalities and VDCs are okay therefore ADDCN is relevant even in the changed context There should be the provision of ex-member of the ADDCN Council in the District Council

5 Communication Network

Publications received, Website very much helpful but need to update

Publications regularly received; Good in content Website very much helpful.

All publications regularly received Website very much helpful. ADDCN website helped to develop our own website

All publications regularly received; quality publication in content and substance Website very much helpful.

All publications regularly received Website very much helpful. ADDCN website helped to develop our own website

All publications regularly received Website very much helpful. ADDCN website helped to develop our own website

All publications regularly received Website very much helpful. ADDCN website helped to develop our own website

All publications regularly received Website very much helpful; Sthaniya Prajatantra (Local Democracy), a quarterly publication of ADDCN is very good both by content and substance

6 Sustainability Government must provide administrative grant to ADDCN to support for its administration

ADDCN can identify new revenue sources of DDCs and charge certain percentage on it ADDCN can have dialogue with Maoist at the center and

Membership fees can be increased. Government should contribute certain amount every year on regular basis Can help DDCs in identifying resource potentials and service fee can

A fixed percentage of internal revenue

Determine a fixed percentage of revenue Minimum support from the government. Provide certain percent from the grants

Allocate certain percentage of DDC revenue to ADDCN

Upscale and downscale its activities according to income sources Scope of increasing membership fee limited, all the revenue sources are being tapped by Maoist, Can assist in

Membership can not be increased as sources are very limited in the changed political situation; Government should contribute certain amount

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA find out solutions regarding revenue generation. ADDCN, in turn, can charge certain amount on collected revenues.

be charged DDC should provide certain agreed proportion of its annual revenue

Allow certain percentage of registration charge

exploring and coordinating donors support to DDCs in their DPP and DAP

every year on regular basis Service fee can be increased DDC should provide certain agreed proportion of its annual revenue

7 Support to DDC in resource identification and mobilization

Assisted in resource mobilization advocated for increasing grant & played vital role to bring out Fiscal Commission

Grant increment was made possible due to ADDCN; Establishment of LBFC has helped to raise the revenue sources

Increased grant & became more systematic than before; revenue sources widened after the establishment of LBFC ADDCN can provide its professional input in identifying resource potential of the DDCs

Pleaded to increase the ceiling of grant & systematized the grant distribution system; Played active role in the formation of LBFC; assisted in resource mobilization

Pressurized the government to increase grants and establish Fiscal Commission; Assisted in resource mobilization

Contributed to increase grants and establish Fiscal Commission; Assisted in resource mobilization

ADDCN can provide its professional input in identifying resource potential of the DDCs

ADDCN can provide its professional input in identifying resource potential of the DDCs

8 Mobilization/coordination of foreign aid

Mobilized but need to increase the efforts

Need to increase the effort for foreign aid

ADDCN needs to be more proactive for internationalizing and mobilizing support

Mobilized foreign aid but need to increase effort

Less effort to internationalize and mobilize support

Unable to mobilize international support for the districts equally

Can play a significant role in exploring donors support in the District annual Plan of DDCs. This could be one potential source of income of ADDCN

Can facilitate in obtaining fund from donors and some contingencies amount can be set aside for ADDCN from such support.

9 Gender Equity & empowerment

Proposed 33% reservation for women

Provisioned mandatory of a women member into council

Worked on gender mainstreaming

Established women subcommittee

Emphasized women participation in development works

Advocated for gender equality

5 % reservation set for women, ADDCN strongly lobbied to increase the reservation. ADDCN is very much instrumental in the current

A separate Committee has been set up for women development

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA arrangement of 33 % reservation for women. Inspired by ADDCN to allocate Rs 15000for each VDCs (Total 48) to train all women VDC members

10 Financial Management & transparency

Contributed to establish and manage DDF although the procedure is not clear to DDC staffs Training/ refresher training to staff of IAS provided; prepare audit manual; assisted in account keeping Manual for public hearing has been prepared

DDF is the effort of ADDCN. But the modality and procedure is not so clear Training/ refresher training to staff of IAS provided; prepare audit manual; assisted in account keeping

DDF is working as a post office. The procedure and modalities must be transparent Training/ refresher training to staff of IAS provided; prepare audit manual; assisted in account keeping; training on good governance conducted

DDF is useful but its procedure must be spelled out. Training/ refresher training to staff of IAS provided; prepare audit manual; assisted in account keeping

DDF is effective but majority of people are confused with its procedure and modalities Conducted training on financial management, established Internal audit Section Supported to develop financial manpower

Need to clarify the management of the fund Trained local staff to prepare account and audit reports

Played an instrumental role in forming DDF;& Internal Audit Section (IAS) established Training/ refresher to staff of IAS provided Practice of pre-audit introduced Financial management and transparency improved

Played an instrumental role in forming DDF;& Internal Audit Section (IAS) IAS established Training/ refresher to staff of IAS provided Internal Audit Manual 2058 prepared and sent. Manual has helped a lot in carrying out audit task Manual for public hearing has been prepared. Support of Rs 20,000 received for organizing public hearing 153 financial regulation are contradicting, LBs have

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA separate financial regulations act and GON has separate financial regulations and many clauses contradict with each other. ADDCN failed to act on this front.

11 Dispute among LBs

Settled disputes whenever appeared

Dispute in revenue sharing; ADDCN helped to settle the dispute

Assisted in designing revenue sharing

Played active role in resolving the disputes

Helped in designing revenue sharing from Kali Gandaki hydro project and resolve the dispute in revenue sharing; Need to act on tourism and forestry

Dispute in revenue sharing not fully resolved ; need to resolve this dispute; ADDCN can contribute in this regard

Ongoing disputes among LBs relating to resources sharing. ADDCN can play a very effective role in resolving such dispute;

Ongoing disputes among LBs relating to resources sharing. ADDCN can play a very effective role in resolving such dispute; Dispute relating to the ownership of Town Hall not fully resolved yet though Supreme Court gave the verdict in favor of Municipality

12 Potential Areas where ADDCN could contribute

Speeding up the devolution process Conduct training

Conduct programs being in tune with PAF, Renewal Energy Contribution to

ADDCN can handle LBs training program

ADDCN can coordinate with LDTA in organizing training programs for LBs

Conduct all the training program required for DDC and line agencies Lobbying for inclusion of

Handle training of DDCs Monitoring

Conduct training programs for DDC Proactive in state restructuring

Gap in the knowledge between UG and DDC technician; UG do not understand many officials formalities

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA for capacity building of DDCs Contribution in state structuring process

strengthen decentralized local governance

decentralization into constitution

decentralization process in changing context

process required; ADDCN can arrange training workshop to aware the UG members; Provision made of a block grant of Rs 1 Million to each VDCs in Annual budget of FY 2006/07. No directives so far have been issued regarding the itemized expenditure ceilings. Along with the authority such directives is required. ADDCN can play a effective role in this sphere.

13 Representation of ADDCN in national level organizations/Safeguarding DDCs interest in different forums

Put revenue issues in MLD

Working as an advocate to put the issues in different agencies and forum

ADDCN has been raising voice on DDC issues and concern

Raised voice and tried to solve the problem

Put issues in related agencies and forum

Framework to raise issues is missing. Communication is weak. Need institutional arrangement

Working as an advocate to put the issues in different agencies and forum

ADDCN represent at RWSSFB as the Chairperson of the Board. Board require our recommendation, however, in the selection execution and monitoring DDCs are completely

S.N THEME JHAPA MORANG KAVRE LALITPUR KASKI SYANGJA BANKE BARDIYA bypassed.

14 Internalization of decentralization & governance issues

Worked to internationalize decentralization movement & built good relation with international community

ADDCN internationally recognized & good relation with international agencies

DDCs are recognized as decentralized zone in international arena

Secured IULA membership; need to increase relations

Publicized Nepal as decentralized nation but must be more active to increase relation

Internationalize decentralization movement; need to bring more international support

ADDCN internationally recognized & good relation with international agencies

ADDCN internationally recognized; Maintained good relation with international agencies

15 Support to DDCs in resolving legal matters

Tried but could not succeed because of legal problems

Till now , DDC itself is resolving its legal matters

DDC itself take care its legal matters

ADDCN lacks legal power to resolve

Unable due to lack of legitimate power

DDC itself take care its legal matters

ADDCN does not have legitimate power to handle legal issues

DDC itself take care its legal matters

16 Relating to a gap between DDC and ADDCN specially during the absence of elected members

An ad-hoc mechanism is needed to fill the gap

At present, there is vacuum, an interim system is required

Need institutional relationship on the absence of elected body.

Need to develop a structure to fill the gap

Develop institutional mechanism

Required institutional framework to fill the gap

An ad-hoc mechanism is needed to fill the gap

An ad-hoc mechanism is needed to fill the gap