This brief summarises some of the key findings of phase 1 (2002-2005) of the Formative Process Research Programme on the local government reform in Tanzania. The principal objective of the reform is to restructure local government authorities so that they can respond more effectively and efficiently to identified local priorities in a sustainable manner. Local government authorities are thought to be in a better position to identify people's needs and to encourage citizens' participation in democratic governance to ensure the appropriate form and level of public services. There was an immense growth in the school enrolment from 2000 to 2003. This can be attributed to the abolition of school fees in 2001 and the launch of the Primary Education Development Plan (PEDP) in 2002. The scarcity of qualified teachers, however, threatens the sustainability of the education reform and tends to widen the gap between 'advanced' councils and those lagging behind. There has also been significant improvement in the health condition of the population in all the councils studied. This is reflected in reduced infant mortality rates, and the immunisation rate has risen to well above 80%. Yet, the majority of the people were dissatisfied because they could not afford healthcare. There was also widespread dissatisfaction with the quality of the water supply. The multiple planning, budgeting and reporting systems strain the limited capacity of the councils. The staff are often overwhelmed by the reporting requirements from various central government ministries and donors, and do not have the capacity to put the reports together. The actual implementation of (realistic) plans and priorities suffers also on the ward and village levels. Village plans become utopic 'shopping lists'. There is an urgent need to simplify and streamline the existing planning and budgeting systems, especially in rural councils. Moreover, many LGAs are severely constrained in the production of reliable fiscal data. The fiscal reporting requirements for LGAs need to be simplified. Priority should be given to build a reliable, consistent and updated database on local government finances and expenditures.