In 2009, the government of the Dominican Republic was highly centralized, with most public services, investments, and resources managed directly by the National Administration. At that time, although local governments would occasionally step in to provide basic services, administration of these efforts was fragmented, discretionary, and inefficient. Most municipalities, especially small ones, did not have functioning organizational structures; they lacked effective financial and administrative systems; and they used few, if any, technical or economic criteria in allocating public resources.
To tackle these challenges, the national government identified good governance and decentralization as key approaches to reducing poverty and improving social cohesion. The resulting governance and decentralization agenda led to the passage of six public sector administration reform laws. These laws provided a new legal framework for local governments, assigned new responsibilities to municipalities for improving residents’ access to basic services, established new planning functions, and laid the framework for allocating expenditures.
Strengthening municipalities’ management functions and their capacity to provide poor communities with at least minimum levels of municipal services became a high priority for the Dominican government. The Dominican Republic Municipal Development Project (MDP used a performance-based approach to address the challenge of low capacity. Targeting local governments in the poorest provinces, the project undertook a comprehensive capacity-building program and provided municipal investments as rewards for good performance. The project was thus structured to provide (i) technical assistance in core municipal management functions, such as participatory planning and budgeting, procurement, finance, and human resources (HR) management, and (ii) matching grants for investment subprojects identified through a participatory process to be part of the MDP. Using this design, the project established a mechanism for financing municipal investments following successful achievement of individual localities’ institutional strengthening targets. Community participation was included to enhance the accountability of local officials for providing municipal services and to increase the sense of community ownership of local investments.