A strong public sector and sound financial management contributes to improved allocation of scarce public resources and better delivery of basic services -- essential components of sustainable, inclusive growth. Focusing on the local level and on basic services and investments – in feeder roads, community marketplaces, irrigation schemes, health stations – helps lay the foundation for bottom up economic development and MDG achievement, particularly in disadvantaged locations.

UNCDF strengthens public finance for local development by:

• Supporting decentralization and building local government capacities: Decentralization puts decision-making closer to citizens, setting the stage for more effective public investment and services. But local governments must have the capacities to determine and plan for the needs of their communities; produce and execute realistic budgets; link their activities to national policies and agencies; and report transparently on activities and use of funds – to citizens and higher levels of government. UNCDF supports decentralization and provides local governments with development funds that improve public investment and service delivery, while building long-term capacities for the effective mobilization, planning, budgeting, delivery and accounting of public resources.

• Strengthening public financial management and investment: Farmers can get their goods to market, and health workers provide better services, if funds for roads and clinics flow efficiently from national treasuries to local governments, and local procurement functions effectively and transparently. UNCDF promotes sound public financial management, best practice investment programming and best value in local procurement to ensure public money is wisely spent. This includes helping to develop the regulations and operating mechanisms of decentralized of public finance, transparency and audit requirements, and promoting newer mechanisms such as performance-based funding. 

• Promoting innovation and own source revenue mobilization: Where decentralized systems are in place and local governments delivering basic services and investments effectively, UNCDF promotes innovations to support larger policy goals including economic development, women’s empowerment, social protection and climate change resilience. UNCDF also helps to develop instruments and capacities for local governments to mobilize their own revenues (e.g. fees, taxes, public private partnerships) to complement central government resources. 

UNCDF delivers its support via:

1. Country programmes: tailored to the needs of individual countries and in a wide range of national settings, including post crisis and other fragile environments. 
2. Global programmes: Some of UNCDF’s recent innovations (e.g. local government finance for women’s empowerment and climate change resilience) are the basis for new global programmes. 
3. Research and advocacy: UNCDF also produces a range of analytical work on public finance and local development and to promotes policy dialogue and advocacy in these areas.