Capacity Building for Local Governments in South-East Europe
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"The MFSA tool is very useful and can help LGs assess their financial performance and look for additional financing. On the other hand, it is a huge responsibility to translate the budget into strategies that will drive LG's development",
Reisa Duraj, Head of Finance and Treasure Relations Sector of the Shkoder Municipality, Albania

"This capacity building program will enhance knowledge and skills of local governments, particularly of medium and large cities."


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Municipal Finances Self-Assessment (MFSA)


Introduction


MFSA, an assessment tool developed by the World Bank and customized for SEE with the support of international and local experts, is aimed at evaluating cities’ financial health and identifying specific actions to improve mobilization of local resources, financial management, public spending, public assets management, investment programming and access to external funding. It performs several functions:

(a) it reviews municipal budgets (revenues and expenditures), financial management practices, savings capacity, investment efforts, and financial projections for the next five years;
(b) it provides some benchmarking through a set of simple and comparable key indicators and ratios;
(c) it defines key actions to be included in a Municipal Finance Improvement Plan aiming for greater accountability, visibility and efficiency in the use of public funds.

So far more than 90 municipalities and cities took part in the Municipal Finances Self-Assessment. What have we done through the UPP Program? We managed to scale up the use of diagnostic tools for local governments and took advantage of the great momentum to replicate the LG tools in more municipalities across the region; we introduced the MFSA Online Tool web-based platform (manual) with the sole aim to help the municipalities and automate the self-assessment process, make it more user friendly and leave more time for drawing lessons and analyzing results. We are now facing a global challenge, with COVID19 providing a new context for the MFSA work to be undertaken in the region.

On the other hand we have MFSA - the Municipal Finances Self-Assessment, as the right tool exactly designed to help in answering some of these questions. Even though the main use of the MFSA is to assess a city’s financial health, creditworthiness and to identify specific actions to improve mobilization of local resources, public spending, public assets management and maintenance, it is also the right tool, given its design, to assess the scale of the COVID-19 impact on LSGs and what LSGs can do in order to mitigate the risks on revenue collections and local expenditures pressures.

The MFSA was so far used to identify a range of risks that may threaten many LSGs in the UPP. To do so, the World Bank’s Municipal Finance Self-Assessment (MFSA) tool was used to test alternative scenarios for LSGs in FY2020 and FY2021 (I believe this should be deleted as it just seems to repeat the previous part of the sentence). Using the MFSA tool, especially the General Accounting Framework (GAF), optimistic and pessimistic scenarios for both FY2020 and FY2021 were analyzed and the results are presented alongside an appropriate recommendation.



MFSA Methodology


The MFSA analysis framework includes eight steps organized in four complementary modules and is continually being evolved in practice and validated by all stakeholders. It provides a platform for making a vital connection between data inputs from various municipal financial and technical departments and allows a creditworthy assessment and strategic and capital investment planning anchored in financial realism.


MFSA - 8 steps infographic



MFSA and COVID-19

 

Among other things, the COVID-19 pandemic puts under stress public finances at the central and local level, puts risks on the central and local governments’ capacity to provide for basic public services, and pressures people to live and work in an emergency environment. The most urgent questions are related to the scale of the COVID-19 impact on LSGs and what the LSGs can do in order to mitigate the risks on revenue collections and local expenditures pressures, while at the same time providing for the public services without major interruptions.

Please check the links to summary reports:
COVID-19 financial impact - Kisela Voda
COVID-19 impact local economy - MGB budget
Presentation Banja Luka MFSA Covid-19
Covid-19 MFSA impact Kraljevo
Tuzla MFSA COVID-19
Municipality of Shkoder - Potential impact of Covid19


Publications

 

Better Cities, Better World: A Handbook on Local Governments Self-Assessments Improving Local Government Capacity MF Handbook CF Improving Local Governments Capacity - The Experience of MFSA in SEE
Better Cities, Better World: A Handbook on Local Governments Self-Assessments Improving Local Government Capacity, 2018 Municipal Finances: A Handbook for Local Governments, 2016. Improving Local Governments Capacity - The Experience of MFSA in SEE

 

Belgrade MFSA Summary
Crikvenica MFSA Summary
Rijeka MFSA Summary
Sabac MFSA Summary
Subotica MFSA Summary

 


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