ABSTRACT
This chapter reviews the major public expenditure management issues at levels of subnational government (SNG) after providing a bird's eye view of decentralization. It explains how SNG budgeting is influenced by the features and timing of the national budget process. The chapter describes the fiscal relationship between central and subnational governments and the methods of controlling SNG borrowing and mitigating fiscal risk from SNG operations. The degrees of "decentralization" differ according to the extent of autonomy of the SNG entities, ranging from simple relocation of a few central government employees all the way to permanent assignment of power and authority to the subnational government level: deconcentration, delegation and devolution. There are several approaches to subdividing the territory of the country into subnational government entities—with different implications for budgeting at SNG levels. They are physical approach, community approach, social/ethnic approach and functional approach.
