Title: When Financial Decentralization Refuses to Comply: Is Government Sleeping on the Job? - A Case Study of Uganda
Authors: Dr. Arinaitwe Julius, Asiimwe Isaac Kazaara, Nabaasa Desire
Volume: 10
Issue: 5
Pages: 122-131
Publication Date: 2026/05/28
Abstract:
This study examined the trajectory of financial decentralization compliance in Uganda over the period 2005 to 2023, interrogating the paradox of a legislatively robust decentralization framework that has consistently failed to produce substantive fiscal autonomy at the sub-national level. Employing a mixed quantitative approach anchored on time series analysis including Augmented Dickey-Fuller (ADF) unit root tests, Ordinary Least Squares (OLS) regression, and Pairwise Granger Causality analysis the study simulated and analysed data on key fiscal indicators including local government own-source revenue, central government transfers, the fiscal decentralization index, the compliance score, the Corruption Perception Index (CPI), and GDP growth rate. Descriptive statistics revealed that local government own-source revenue averaged only 18.62% of local government budgets, against an overwhelming mean of 77.51% attributed to central government transfers, confirming a deep-seated fiscal dependency. ADF tests confirmed that all major variables were integrated of order one [I(1)], validating the use of differenced series in regression analysis. OLS regression results demonstrated that local own-source revenue (? = 0.83, p = 0.001) and the fiscal decentralization index (? = 0.61, p = 0.018) were statistically significant positive predictors of the compliance score, while central government transfers exerted a significant negative effect (? = -0.42, p = 0.033), suggesting that the architecture of financial dependency actively undermines regulatory adherence. Granger causality tests further revealed unidirectional causality running from the fiscal decentralization index, central transfers, and local revenue to compliance scores, affirming that fiscal structure precedes and determines governance outcomes. The study concluded that the Ugandan government has been insufficiently proactive in enforcing financial decentralization mandates, allowing institutional inertia, elite capture, and structural dependency to perpetuate non-compliance. The study recommended the progressive reduction of conditional grants, the strengthening of the Local Revenue Enhancement Programme, and the establishment of an Independent Fiscal Decentralization Oversight Authority to institutionalize accountability and compliance monitoring.