Explaining Leakage of Public Funds

Abstract

Using panel data from a unique survey of public primary sociopolitical endowment.Rather than being passive schools in Uganda, Reinikka and Svensson assess the recipients of flows from government, schools use their degree of leakage of public funds in education.The bargaining power relative to other parts of government survey data reveal that on average during 1991-95 to secure greater shares of funding.Public resources are schools received only 13 percent of the central therefore not allocated according to the rules underlying government's allocation for the schools' nonwage the government's budget decisions, with obvious equity expenditures.Most of the allocated funds were used by and efficiency implications.public officials for purposes unrelated to education orThe survey findings had a direct impact on policy in captured for private gain (leakage).Uganda.As evidence on the degree of leakage became The survey data also reveal large variations in leakage public knowledge, the central government enacted a across schools.A small set of school-specific variables can number of changes: it began publishing monthly transfers explain a significant part of this variation.Specifically, of public funds to the districts in newspapers, the authors find that larger schools receive a larger share broadcasting them on radio, and requiring schools to of the intended funds per student.Schools with children post information on inflow of funds.An initial of wealthier parents also experience a lower degree of assessment of these reforms shows that the flow of funds leakage, while schools with a higher share of unqualified improved dramatically, from 13 percent on average teachers receive less.After addressing potential selection reaching schools in 1991-95 to around 90 percent in and measurement issues, the authors show that these 1999.These improvements emphasize the role of school characteristics have a quantitatively large impact information in mobilizing "voice" for better public on the degree of leakage.expenditure outcomes.The findings are consistent with the view that resource flows-and leakage-are endogenous to schools' This paper-a product of Public Services for Human Development, Development Research Group-is part of a larger effort in the group to study the role of governance in the provision of public services.

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