Chapter four: Economic governance and management 116 412. Lesotho has adopted a Public Sector Improvement and Reform Programme (PSIRP). The PSIRP is intended to improve public sector performance, with a special focus on improving financial management and accountability, to decentralise service delivery and to promote a committed, disciplined and motivated workforce. The Public Service Act was revised in 2005 and new public service regulations have been introduced. Accordingly, ministries have been restructured and most of them have developed strategic plans. Nevertheless, challenges remain, especially in areas of motivating the civil service and of shifting towards a service-oriented work culture. 413. The key feature of local governance is that communities elect their local councils, which are then responsible for planning and managing development. In order to ensure that the effort to promote public participation is sustainable, a Directorate of Public Sector Effectiveness has been established in the Office of the Prime Minister. Some of the core functions of this directorate are to conduct national needs assessment surveys and to engage civil society in national strategic leadership processes. The Local Government Act of 1997 (as amended in 2004) provides for the decentralisation of public services through the establishment of local authorities that include community, municipal, district and urban councils. There are currently 128 local government areas in Lesotho following the 2005 local government elections, and one municipal council. The 10 district councils are constituted by members from the 128 elected councils. The CSAR indicates that Lesotho has an orderly and participatory budget process. It involves central agencies, spending agencies and political leaders in accordance with a predetermined budget calendar that is broadly adhered to. A budget circular is issued to the involved spending agencies roughly two months before the actual preparation of the budget. It indicates ceilings for each ministry’s recurrent budget. Ministries have internal arrangements, mostly in the form of budget committees, for developing budget bids for both capital and recurrent expenditures. After technical discussions of the budget bids with line ministries, the minister of finance and development planning presents the draft budget to the Cabinet. 414. Following the Cabinet’s approval, the draft budget is presented to Parliament for approval. After presentation of the budget speech, public officers in the MoFDP and the minister engage in public debate on the key elements of the budget speech at district level. Where possible, the final budget incorporates relevant suggestions from the public. However, the CSAR notes that the public still views the budget process as the sole business of bureaucrats who have the power to decide on the final budget. The public lacks adequate access to information and channels for effective interaction with government structures to ensure transparency in budget allocations and efficiency in service delivery. 415. The CSAR also underscores weaknesses in the public finance management system and the credibility of the budget process. Budget allocations in Lesotho have largely been made on an incremental basis. They are focused on inputs and pay little attention to the purpose of expenditure. Until recently, budget ceilings were set without consulting with line ministries and setting ceilings was seen primarily as a technical exercise based on projections from the past. Consequently, allocations for several ministries have largely grown in line with total expenditure over the last five years. Actual expenditures at the end vary widely from the original budget for many ministries. This raises concerns regarding the credibility of the budget process in the country.