Local Level Financial Systems: A Study on Three Union at Sylhet Sadar Upazilla in Bangladesh

Journal of Social Science and Humanity (JSSH) | Vol.2 No.2 | July 2018
Triple A Research Journal of Social Science and Humanity (ISSN: 2636-5472)
Vol.2(2): 038 - 047, July 2018
Available online: http://www.triplearesjournal.org/jssh
Copyright ©2018 Triple A Research Journal
Full Length Research Paper
Local Level Financial Systems: A Study on Three Union
at Sylhet Sadar Upazilla in Bangladesh
MD. Anwar Hossain
Master of Research Students, Department of Public Administration, Shahjalal University of Science and Technology,
Sylhet, Bangladesh
Author:
MD. Anwar Hossain
Master of Research Students, Department of
Public Administration, Shahjalal University of
Science and Technology, Sylhet,
Bangladesh
Email address: ahossain.anwar@gmail.com
ABSTRACT
In this research paper has tried to show, first look at the context of
financial systems of local level finance particularly three union at
Sylhet Sadar Upazilla. This study conducted following mixed (both
qualitative and quotative research) approach based on primary and
secondary source to give out purpose of this study. Some case
studies have considered reveal the study findings. This study
intended to represent picture of local finance system at grassroots
level. Findings also suggest that, effective local government
procurement policies and practices contribute to sound financial
management.
Keywords: Finance, Local Level, System, Local Government
INTRODUCTION
Greater decentralization of government functions must be
accompanied by concomitant fiscal devolution as well as
increasing capacity of local governments to raise revenues
on their indeed, one of the guiding principles of
decentralization requires the devolution of financial powers
to follow functional devolution. In other words, the extent of
autonomy depends on the extent to which local bodies can
raise revenues independently and allocate their resources
for expenditure. From a fiscal perspective, Bangladesh is a
highly centralized state. Bangladesh lags behinds most
countries of its size (e.g. Indonesia and South Africa) in
terms of local government expenditures which yet to cross
three% of GDP. Further, the extent of fiscal powers
accorded to various tiers of local governments is also very
limited. (Salehuddin, 2014:7) The Local bodies in
Bangladesh are in constant shortage of funds. The sources
of their income are generally taxes, rates, fees and
charges levied by the local body as well as rents and
profits accruing from properties of the local body and sums
received through its services. Contribution from individuals
and institutions, government grants, profits from
investments, receipts accruing from the trusts placed with
the local bodies, loans raised by the local body and
proceeds from such services are another source of income
governments may direct to be placed at the disposal of
local body. Holding taxes is the most important source of
own income of local bodies. Loans and voluntary
contributions are rare. Non-tax revenues are of two kinds:
fees and tolls and rents and profits on properties of the
local bodies. (Salehuddin,2014:7)
Total annual local government expenditure as a
percentage of gross domestic products has hardly crossed
more than 3% in Bangladesh (Fox and Menon,2008). As a
matter of fact, the local government financial system in
Bangladesh is one of the most centralized in the world.
Total annual local government expenditure as a
percentage of total consolidated government expenditure is
estimated to be in the range of 2-3% on an average.
Comparable figures for Indonesia or South Africa, two
countries that decentralized within the past 20 years, are
34% and 52%, respectively (Das ND). On the revenue
side, most major tax bases in Bangladesh remain under
the control of the central government. While own source
revenue potential varies vertically across different levels as
well as horizontally across different institutions at each
level, less than 2% of total government revenue is

039 Triple A Res. J. Soc. Sci. Human.
collected at local levels, again placing Bangladesh at the
lowest end internationally (Das ND). The general objective
of this study is firstly: evaluating local level financial
system in Bangladesh and Secondly: to find out dimension
of local level financial systems.
Perspective of Local Finance
Financial condition may be defined as the ability of a local
government to balance recurring expenditure needs with
recurring revenue sources, while providing services on a
continuing basis. A community in good financial condition
generally maintains adequate service levels during fiscal
downturns, identifies and adjusts to long-term economic or
demographic changes, and develops resources to meet
future needs.
Financial condition is affected by a combination of
environmental, fiscal and organizational factors, including
decisions and actions of the governing board (ICMA,
2003). For example, a steady population decline can lead
to an erosion of the property tax base (a negative
environmental trend). However, the ways in which local
officials respond to this decline (such as cutting services,
increasing tax rates, or engaging in economic
development) also affect the financial condition of the local
government.
Financial factors include intergovernmental constraints
such as tax and debt limits, access to major revenue
sources (such as sales tax), and mandated expenditure
requirements. These fiscal constraints often limit the
choices available to local officials in managing their
budgets.
Organizational factors include management practices
and legislative policies that guide fiscal decision making,
often in response to environmental or political factors.
While sound budgeting and management practices can
help protect the financial condition of local governments
and school districts, these factors cannot always avert
fiscal stress — especially when negative environmental
trends are severe. However, poor budgeting and
management practices can create fiscal problems despite
a sound economic environment.
Environmental factors include measures of community
needs and resources such as population, property value
and poverty, and economic factors such as inflation,
personal income and employment. These environmental
indicators often provide the best “early warning” of future
fiscal stress. Research by OSC has concluded that there is
a strong correlation between environmental factors and
financial condition, and that fiscal stress is often apparent
in these measures before it is evident in the financial data.
Local finance simply defined as local bodies and their
financial responsibilities, local taxation, and measures for
improvement of local finance. On the other hand, the
mobility may be endogenous to the revenue or expenditure
actions taken by the local public authority and this must be
considered in any economic analysis of local finance
(Quigley, 2008:2). Moreover, local finance is compared of
regular and special revenues. Tax and non- tax revenue
sources are regular revenue, while subsidies, trust funds
and borrowing special revenue. Tax revenue sources for
local government include locally levied taxes and shared
taxes. There is also much non- tax revenue. So, local
finance is the broader base of local revenue sources and
increased opportunities for local governments to mobilize
new revenue sources (Hawn Kim, 2003; 540).
Dimension of Local Finance
In Bangladesh, the central government is responsible for
making a major annual fiscal transfer to the local
governments in terms of block grants under the Annual
Development Programme (ADP). In fact, ADP funds the
development budget of the central government which is
financed by the surplus revenue budget, domestic
borrowing, external borrowing and aid from donor
agencies. The transfers through the ADP are segmented
into four major expenditure classifications:
sector/programme allocation, self-financed allocation and
food assistance (Fox and Menon, 2008) Of these, the block
allocations fund the local government block grants. A large
share of ADP allocations supports vertically-driven sector
programmes that are implemented directly by ministries
and their subordinate agencies. Only a small share of
allocations is channeled through block allocations, of which
smaller share translates into transfers to local governments
(Fox and Menon, 2008).
Monitoring Systems
In the monitoring system of local finance system are
throughout the year, the local official adjusts the cash flow
forecast as needed and keep the data as current as
possible, revising the forecast with any new information
that may become available. The actual process of
monitoring mechanism local level finance depends on by
co-coordinating meeting by local representative. The one
co-coordinating meeting held in a month of Union Parishad
with the presence of Chairman and member. In the Union
Parishad meeting the total amount of the union rates to be
realized from the inhabitants of the union in a year is
decided upon. The Union Parishad members of the
respective areas are made responsible for levying the
union rates on the individual households of the villages in
consultation with local leaders (Matbars). It is claimed that
in fixing the amount of the union rates to be paid by
individual households, their economic conditions are
always taken into consideration.
Auditing and Inspection Systems
The financial audit of local level finance assesses the
internal control systems that ensure the quality of
accounting information and financial reporting. Financial
audits include financial statements, accounts, accounting,
receipts, and other financially related issues. Financial

MD. Anwar Hossain 040
statement audits provide reasonable assurance about
whether the financial statements of an audited entity
present fairly the financial position, results of operations,
and cash flows in conformity with accounting standards.
The annual statement is to be forwarded to the prescribed
authority by thirty first December of the following year. A
copy of the annual statement of accounts is to be placed in
the Parishad office for public inspection. After considering
all objections and suggestions made by the public, the
Parishad is then required to bring it to the notice of the
audit authority. The government and the Deputy
Commissioner (DC) are mentioned as the prescribed
authority. The Upazilla accounts officer maintained
accounts of receipts and expenditures of the Union
Parishad. After annual statement used to be forwarded to
the Upazilla Parishad and after it goes to Deputy
Commissioner.
Financial audits also determine whether;
a. Financial information is presented in accordance with
established or stated criteria
b. The entity has adhered to specific financial compliance
requirements, or
c. The entity’s internal control structure over financial
reporting and safeguard in assets is suitably designed
and implemented to achieve the control objectives.
Budgeting Process
Traditional budgets are based on the organizational
structure, more specifically, identification of those officers
within the government who are held accountable for
spending money against budgets such as Upozilla Nirbahi
Officer (UNO) and people representative of local
government. This feature of budgets applies whether
budgets are highly aggregated or whether there is
significant devolution of budgets. The organizational
structure locates the budgets. Budgets tend also to focus
on one year, the coming fiscal year of Union Parishad. This
annual request embodies another common feature of
budgets: the request for the coming year is justified in
terms of marginal changes from the previous year’s
budget. The essence of this feature of budgeting is not that
budgets must always increase but that budgets are justified
by marginal changes from previous years, which may, in
principle, be decrements. The significant proportions of a
local government’s income tend to consist of grants from
other governments, including the national government, and
taxation. Cash accounting for these kinds of income is
useful and straightforward; recognition of receivables and
payables might be useful but is also usually difficult. In
sum, budgets of local finance are traditionally line-item,
incremental requirements that reflect the Union Parishad
financial structure. Being expressed in money terms, they
are natural ways of requesting money.
An accounting system of local finance recognizes
goods and services ordered by the local government is
called commitment accounting. In principle, an accounting
system could be devised that recognizes goods and
services ordered from the local government but such a
system would be unlikely to be useful. The main purpose of
commitment accounting is in budgetary control; indeed,
one of its main difficulties is its relationship to financial
reporting. Commitment accounting provides a more useful
record of “spending” against a budget, for both the budget
holder and those with higher responsibility for budgetary
control, than either records of goods and services received
(which are strictly unnecessary for commitment
accounting), or of cash paid (which are necessary for all
accounting systems). It records spending at the earlier
point at which an official order is issued for the supply of
goods or services, thereby recording a commitment by the
budget holder and therefore by the local government to
receive the goods or services in the stated quantity, at the
stated price. Because commitment accounting depends on
orders being issued, it applies only to parts of a local
government budget, though it can relate to many small
transactions: the parts to which it generally does not apply
are employee expenses, financing expenses, and those
running costs (such as gas, electricity, telephones) that are
supplied without recurring orders (Table 1, 2 below).
Tax collection Procedures
Revenue collection is one of the main functions of local
governments. Local governments collect funds from a
variety of revenue sources, including fines, fees, taxes,
licenses, permits, and special assessments. Revenues are
received in a timely manner, credited to the proper fund,
and deposited into the correct bank account as quickly as
possible. In addition, governments should strive for high
collection rates for all revenues owed and keep the
payment-making process simple and easy for citizens.
The Union Parishad prepare a valuation list of all buildings
within the union through an assessor to be appointed for
the purpose by the Union Parishad with prior approval of
the relevant authority. Such an assessor may either be a
member or any other suitable person. The prescribed
authority has never insisted that the Union Parishad follows
the correct procedures as rules in assessing the union
rates. The present practice of taxing the union rate without
any fixed economic basis leaves sufficient leverage for
both under assessment and over assessment. The present
practice tempts the Union Parishad leaders to under tax
their friends, relatives and political supporters and overtax
their opponents or political rivals. So, the Outcome is
insufficient yields of revenue to the Union Parishad fund
and intensification of village factional politics. But it’s a
matter of fact that Union Parishad have lack of human
power to collect taxes and people are not enthusiastic to
pay taxes. The Union Parihads to levy seven types of taxes
and rates in terms of a certain percentage of the annual
valuation. That is union rate, taxes on hearth, lighting rate,
drainage rate, conservancy rates, rates for provision of
water supply and rates for the remuneration of village
police. For assessing the other types of taxes, the Union
Parishad is guided by the rates mentioned in the model tax

Table 1. Sylhet Sadar Upazilla Budget (2016-2017)
Specification (Acquisition of Revenue Accounts) Taka
Revenue 4,23,15,000
Donation ------------
Total Acquisition 4,23,1500
Without Revenue Expenditure 61,74,640
Revenue Surplus/Deficiency 3,61,40,360
Development Accounts
Development Donation
3,54,00,000 (Surplus Revenue)
60,000,000 (Development)
Constructing of Upazilla Building 30,00,000
Total Acquisition of Wealth 4,44,000,00
Without Development Expenditure 4,44,00,000
Total Budget Surplus/Deficiency 3,61,40,360
Source: Collected from Sylhet Sadar Upazilla, April 2017
Table 2. Khandigaon, TukerBazar and KhadimNagor Union’s proposed financial year
(2016-2017) budget is given below
Union Name Income (Taka) Expenditure(Taka)
Khandigaon 5843915 584067
Tuker Bazar 7418000 7361620
Khadim Nagor 9590700 9296300
Source: Compiled with the information collected from Khandigaon Union, Tuker Bazar
Union and Khadim Nagor Union. April 2017
schedule. The specific grants are given to the Union
Parishad under three separate but similar types of
programmes. These are;
1. Rural Works Programme (RWP)
2. Food for Works Programme (FFWP), and
3. Test Relief Programme (TRP).
To obtain these funds, the Union Parishads are required to
submit schemes to the Deputy Commissioner every year
with complete specifications and project estimates in the
prescribed. Besides,
The Union Parishads (Ups) have three sources of revenue
from central government:
• Annual revenue budget which contributes to costs of
salaries and honoraria.
• 1% land transfer tax on land transfer within the union
boundaries (a land transfer tax of 2% is collects and
half of this now goes to the Ups.
• The Annual Development Programme (ADP) block
grant for Union and Upazilla development from the
central budget via the ministry of local government.
The government of Bangladesh has recently adopted
measures to increase the revenue that flows to up by
reducing the proportion of the revenue transferred –to-
central government by Ups from 35% to 25% and
increasing the lease value threshold at which a proportion
of the lease revenue flows to Upazilla, rather than Union
level. (Aminuzaman 2002:2014) (Table 3, 4 below).
At the grass root level, development projects are
undertaken and being implemented through depending on
the guidelines given by the controlling or funding authority.
In Bangladesh at UP level, usually four types of
development projects are being undertaken and
implemented now-a-days.
METHODOLOGY AND FRAMEWORK
The study has been conducted through survey and case
study design. Moreover, in case where the population is
too large to observe directly and the best option for
collecting primary data. Through case study design a study
directed at how decisions are made, the unit of analysis is
decisions.it would like to select some samples areas which
may represent whole of Bangladesh and it is easy to
communication and easy to collect data for the fulfillment of
the research objectives, the study has selected areas;
Khadimnagar Union, khandigaon Union, and Tuker Bazaar
Union under Sylhet Sadar Upazilla for the case study
purpose.
Population of the study is all the service recipients from
local authorities. Specific number of population is unknown
here. So, samples of eight hundred respondents have
been selected purposively based purposive sampling.
Service recipient have been identified who came during the

Table 3. Allocation for Local Government Institution (LGI) (Cr.TK)
2013-2014 Medium Term Projection
2014-2015 2015-2016 2016-2017
Union Parishad 160.00 165.00 178.00 192.46
Upazilla Parishad 368.20 460.00 311.17 666.47
Source: MTBF, Budget Speech and Bangladesh Economic Review (Various Years)
Table 4. Development Projects Currently Undertaken at UP
S. No. Types of Development Projects Funding Authority
1. ADP Funding Project Local Government Division
2. Local Governance Support Project
(LGSP)
Local Government Division in collaboration with
WB, UNDP, UNCDF, DANIDA and EC
3. Relief and Rehabilitation Program (Social
Safety-net Programs)
Ministry of Food and Disaster Management
4. Direct Funding Program Local Government Division
Source: Mohammad, 2010: 50
Table 5. Area Distribution of Respondents (Public Representatives)
Union Number of Respondents Percent Valid Percent Cumulative Percent
Tuker Bazar 13 26.0 26.0 26
Khandigaon 13 26.0 26.0 52
Khadim Nagor 13 26.0 26.0 78
Sadar Upazilla 11 22.0 22.0 100
Total 50.0 100.0 100.0
Source: Field Data, March ,2017
Table 6. Union Distribution of Respondents (Local Financial Consumers)
Union Number of Respondents Percent Valid Percent Cumulative Percent
Tuker Bazar 250 33.3 33.3 33.33
Khandigaon 250 33.3 33.3 66.66
Khadim Nagor 250 33.3 33.3 100
Total 750 100.0 100.0
Source: Field Data, March 2017
conduct of research. This study has been done based on
the perceptions of 50 public representatives of Tuker
Bazar, Khandigaon, Khadim Nagor and Sadar Upazilla and
750 local financial consumers of Tuker Bazar, Khandigaon
and Khadim Nagor Union from 142431 inhabitants. The
public representatives and local financial consumers have
different characteristics with respect to local financial
presentation as well as socio-economic surroundings. The
local consumers are the pressure group and the local
representatives are the influential group of local level
Finance. Ensuring accountability and transparency at local
level finance of Tuker Bazar, Khandigaon, Khadim Nagor
under Sylhet Sadar Upazilla in this part by analyzing the
variables from the respondents (public representatives and
local financial consumers) opinion (table 5, 6).
FINDINGS AND DISCUSSION
Most of the respondents (90%) have idea about local
sources of finance (table 7 below). Besides, other (6.0%)
respondents have no knowledge about local source of
finance and only (4%) respondents have no comment
about idea about local sources of finance. In this study,
regarding as that respondents have adequate knowledge
about local sources of finance.

Table 7. Idea about Local Sources of Finance (Public Representatives)
Idea about Local Sources
of Finance
Number of
Respondents
Percent Valid Percent Cumulative
Percent
Yes 45 90.0 90.0 90.0
No 3 6.0 6.0 96.0
No Comment 2 4.0 4.0 100.0
Total 50 100.0 100.0
Source: Field Data, March,2017
Table 8. Involvement of People’s Participation in UP Budgeting
People’s Participation
in Budgeting
Number of
Respondents
Percent
Yes 50 100.0 100.0 100.0
Table 9. UP Disseminates Financial Information
UP Disseminates
Financial Information
Number of
Respondents
percent
Yes 47 94.0 94.0 94.0
No 2 4.0 4.0 98.0
No Comment 1 2.0 2.0 100.0
Total 50 100.0 100.0
Table 10. Opinion about Audit held regularly
Audit held out
Regularly
Number of
Respondents
percent
Yes 48 96.0 96.0 96.0
No 2 4.0 4.0 100.0
Total 50 100.0 100.0
All respondents (100%) think that involvement people’s
participation in UP budgeting is satisfactory (table 8).
Analyzing the above mentioned statistical data it can be
said that involvement people’s participation in UP
budgeting is adequate.
The statistical information (table 9) represents the high
possibility of it. Among the respondent’s majority has been
said “yes” (94%) in questioning about UP disseminates
financial information whereas 4% said no. Only one
respondent opinion has “no comment” about it.
The table (table 10) shows that Maximum (96%)
respondents believe that audit held regularly at local level
finance, whereas rest of them (4%) are not agreed with
this. Analyzing the above mentioned statistical data it can
be said that audit held regularly at local level finance.
The statistical information (table 11) represents the
high prospect of it. Among the respondent’s majority has
been said “yes” (78.0%) in questioning about inspection
held regularly at local level finance (22.0%) said no.
Considering this sense, it can be said that inspection held
regularly at local level finance
According to table 12, maximum respondents think
(96.0%) that UP has autonomy in its income and spending,
where the small number of respondents are not agreed
(4.0%) with this statement.
Most of the respondents (76.4%) have no idea about
local source of finance. Besides, other (23.1%)
respondents have knowledge about local source of finance
and only (0.5%) respondents have “no comment” about
idea about local source of finance. In this study, regarding

Table 11. Opinion about Inspection Held Regularly
Inspection Held
Regularly
Number of
Respondents
percent
Yes 39 78.0 78.0 78.0
No 11 22.0 22.0 100.0
Total 50 100.0 100.0
Table 12. Opinion about UP has Autonomy in Its Income and Spending
Up has Autonomy in its
Income and Spending
Number of
Respondents
percent
Yes 48 96.0 96.0 96.0
No 2 4.0 4.0 100.0
Total 50 100.0 100.0
Table 13. Idea about Local Level Finance
Idea about Local Level
Finance
Number of Respondents Percent Valid Percent Cumulative Percent
Yes 173 23.1 23.1 23.1
No 573 76.4 76.4 99.5
No Comment 4 0.5 .5 100.0
Total 750 100.0 100.0 23.1
Table 14. Opinion about People’s Participation in Financial Management
People’s Participation in
Financial Management
Number of
Respondents
Percent
Yes 133 17.7 17.7 17.7
No 603 80.4 80.4 98.1
No Comment 14 1.9 1.9 100.0
Total 750 100.0 100.0
as that respondents have no adequate knowledge about
local source of finance (table 13).
Maximum respondents (80.4%) think that involvement
people’s participation in financial management is not
satisfactory whereas (17.7%) respondents said
satisfactory. Only (1.9%) respondents have comment on
medium about this. Analyzing the above mentioned
statistical data it can be said that involvement of people’s
participation in financial management is not adequate
(table 14).
Table 15 below shows that maximum (81.2%)
respondents have no people’s participation in budgeting,
whereas (17.2%) “yes” with people’s participation in
budgeting. Only (1.6%) respondents have “no comment”
about this. Regarding this sense, it can be said that people
participation in budgeting is not adequate.
UP has deficient for disseminating financial
information. The statistical information (table 16 below)
represents the high possibility of it. Among the
respondent’s majority has been said “no” (82.3%) in
questioning about UP disseminates financial information
whereas (14.9%)said no. Only (2.8%) respondent’s
opinions have “no comment “on the subject.
Most of the respondents (58.8%) agreed with problems
occur in auditing and inspection of local level finance.
Besides, other (29.3%) respondents do not agree with this
statement, and only (11.9%) respondents have “no
comment” about problems occur in auditing and inspection

Table 15. Opinion about People’s Participation in Budgeting
People’s Participation in
Budgeting
Number of
Respondents
Percent Valid
Percent
Cumulative
Percent
Yes 129 17.2 17.2 17.2
No 609 81.2 81.2 98.4
No Comment 12 1.6 1.6 100.0
Total 750 100.0 100.0
Table 16. Opinion about Disseminate Financial Information of Union Parishad
Disseminate Financial
Information of Union Parishad
Number of
Respondents
Percent Valid
Percent
Cumulative
Percent
Yes 112 14.9 14.9 14.9
No 617 82.3 82.3 97.2
No Comment 21 2.8 2.8 100.0
Total 750 100.0 100.0
Source: Field Data, March,2017
Table 17. Opinion about Problems in Auditing and Inspection System of Local level finance
Problems in Auditing and Inspection
system of Local Level Finance
Number of
Respondents
Percent Valid
Percent
Cumulative
Percent
Yes 441 58.8 58.8 58.8
No 220 29.3 29.3 88.1
No Comment 89 11.9 11.9 100.0
Total 750 100.0 100.0
Table 18. Opinion on Idea about Different Committees of Union Parishad in Development Activities
Idea about the Development
Committees of Union Parishad
Number of
Respondents
Percent
Yes 54 7.2 7.2 7.2
No 655 87.3 87.3 94.5
No Comment 41 5.5 5.5 100.0
Total 750 100.0 100.0
of UP. In this study, considering this sense it can be said
that problems have effect in auditing and inspection of local
level finance (table 17).
People have no idea about the development
Committees of Union Parishad. The statistical information
(table 18) represents the high probability of it. Among the
respondent’s majority respondents said “no” (87.3%) in
questioning about idea about development committees
said “yes” (7.2%). Only (5.5%) respondents have comment
about this. Considering this sense, it can be said that
people have no participation in development committee or
motionless development committee of Union Parishad.
Besides, case of disseminating financial information of
Union Parishad:Karim Moral, age 45, a farmer of
Khadimnagor under sadar upazilla in sylhet district says:
“We do not get financial information of Union Parishad .
Chairman and member panic about disseminating financial
information. They think that if people know about financial
information and general people raised questions against
them. General people do not know current financial

information of Union Parishad. Disseminating financial
information system of UP is based on traditional system”
(Interview 1, April 2017).
Moreover, Rahman, Kabir and Razzaque (2005; Pp19)
prepared a report for the World Bank, examining the level
of civic participation in sub-national budgeting in
Bangladesh. They concluded “The budget-making process
in Bangladesh is still very bureaucratic and non-
transparent. Yet the role of the elected representatives is
very limited in prioritizing the development
projects/programmes. As such the budgeting tends to be
incremental, often heavily pulled by political and other
kinds of lobbyists. The local level budgeting is even more
non-democratic. It is fully dependent on the whims of
central budget-makers. The resource generated from
within the jurisdiction of local government is also very
limited.
Helal Ahmed, age 38, a business man of Khadim
Nagor Union Under Sadar Upazilla in Sylhet District says:
“We do not see people participation in Union Parishad
Budget and no general people involvement in budget.
People do not know when budget is declared and when it
is sanctioned. It is totally unknown to general people.
Chairman and member call only local elite people and
some political people of UP. Amount of budget is totally
unknown to general people. Chairman and members of UP
decides what will be next year budget. They ignore
general people opinion related to budget. Actually,
chairman and members of UP do not want that general
people’s participation in budget” (Interview 2, April 2017).
Case of People Participation in Union Parishad Project
Motin Mia, age 35, a business man of Tuker Bazar under
Sadar Upazilla in Sylhet District says “There have no
people participation in UP project and chairman appoint
some political people involve in project. Some people gain
profit in this project and no mass people involve in Union
Parishad project” (Interview 3, April 2017).
All the Chairmen and Members are more interested in
the project implementation committee (PIC) or other project
committees, most of the standing committee’s activities are
not related with monetary matters, so the members are not
much interested in the activities of those committees.
People participation in Budgeting is not satisfactory. Many
development respondent’s opinion that LGIs (Local
Government Institutions) do not promote participation. The
institutional arrangements of those institutions hardly
encourage popular participation in the decision-making
process.
Case of Development Committee in Union
Parishad:Saleh Ahmed, age 33, a shop owner of Tuker
Bazar Union under Sadar Upazila in Sylhet district says:
“We do not know how many standing committees are there
and what their duties are, but we see sometimes some
political people involved in Union Parishad Project
Commitee . I think village “matabbar” people and some
political leader give answer that they have heard about UP
Standing Committee. He says general people do not know
what no. of standing committees of Union Parishad and are
all those committees necessary for an effective Union
Perished”. In our union general people mention it pocket
committee not development committee (Interview 4, April
2017).
All the Chairmen and Members are more interested in
the project implementation committee (PIC) or other project
committees, most of the standing committee’s activities are
not related with monetary matters, so the members are not
much interested in the activities of those committees.
People participation in Budgeting is not satisfactory. Many
development respondent’s opinion that LGIs (Local
Government Institutions) do not promote participation. The
institutional arrangements of those institutions hardly
encourage popular participation in the decision-making
process.
Discrepancies in the accounting records, such as
transactions not completely, not timely, or improperly
recorded; last minute adjustments significantly affecting the
financial statements; inadequate authorizations; tips or
complaints. Conflicting or missing evidence, such as
missing documents; unexplained items on reconciliations;
inconsistent, vague, or implausible responses to questions;
differences from confirmations of balances, difficult or
unusual relationships between auditor and audit, such as
denial of access to information or unwillingness to
cooperate, undue time pressure, delays in providing
requested information, unwillingness to address identified
weaknesses in internal control of local level finance.
Case of Problem in Auditing and Inspection system of
Local Level Finance: Shimul Biswas, age 30, a grocer of
Khandigaon Union under Sadar Upazilla in Sylhet District
says: “There has quandary in auditing and inspection
system of local level finance. In Union Parishad have a lot
of discrepancy in auditing and inspection system. Auditing
and inspection is not held regularly. General people is not
involved in auditing and inspection system. Auditing and
inspection reports are not published” (Interview 5, April
2017).
Case of monitoring mechanism of Local Level Finance
Babul Mia, age 37, a village doctor of Khandigaon Union
says: “The present monitoring mechanism of local level
finance is not satisfactory and they are not able to treat
local finance monitoring in right way what are people
expected. It is totally unknown to people. The coordinating
meeting is not regular basis to monitor local level finance.
In some cases, only chairman and some selected member
monitor local level finance. On the other hand, lack of
training of monitoring local level finance, chairman and
members are not properly monitoring it” (Interview 6, April
2017).
CONCLUSION
Developing countries like Bangladesh must consider the
repercussions of the way in which power is distributed and
exercised along with local financial policy. For many
reasons, corruption is minimized when transparency of the

local financial system is maximized, yet when decisions are
not made locally, local beneficiaries have difficulty
understanding how and why the actual local financial
decisions were reached. Thus, central government must
weigh the efficiencies that can come from a centralized
national financial system against the loss of accountability
and legitimacy that may result from opaque decision-
making structures at the local level finance. The most
decentralized financial structural design shifts power to the
local levels of government and their line staff. By
fragmenting authority, decentralization is often seen as one
of the best ways to increase intergovernmental
competition, strengthen checks and balances, increase
accountability by responding to local needs, and possibly
reduce the role of the state in general.
In study area, it was found that the challenges
regarding local financial issues are corruption, lack of
people participation in project and budget, poor idea about
local level finance and its mechanism, lack of development
committee, UP does not disseminate financial information,
shortage of human power , irregular auditing and
inspection system, lack of trained personnel, traditional
local financial system, political syndicate among civil
society, lack of digital financial system , not have of women
members participation in standing committee and project
at local level finance.
For effective local financial systems different
development of UP should lively work and general people
should involve in this standing committee. Local official
should supervise the budgetary management of those
reporting to them. Full stores records should be maintained
of orders, receipts, issues, returns, and write-offs. Define
the methods to be used in appointing a chief auditor and
individual auditors; Make clear the qualities and
professionalism required for the internal auditors.
Preparation of a comprehensive Union Plan and inclusion
of inter-ward development projects after identification and
prioritization
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Local Level Financial Systems: A Study on Three Union at Sylhet Sadar Upazilla in Bangladesh