FISCAL ADMINISTRATION IN THE LGUs

Local fiscal administration refers to the conduct and management of financial affairs, transactions, and operations of provinces, cities and municipalities and barangays.

B. Where does the money to support government expenditures came from?

a. Internal Revenue Allotment (IRA)

The Internal Revenue Allotment refers to the share of local governments from the collection of taxes which are imposed by the national government. These include income taxes, VAT and excise taxes.

The IRA accounted for 36% of total pulic revenue of local government from 1980-1990. This went up to almost 56% in 1992. In lower income provinces and municipalities, the IRA contributes from 65% to 90% to their total revenues.

a. Income from Local Sources

LGUs do not have the inherent power to tax. The power inherently belongs to the State. This power could however be delegated through legislation.

The 1987 Constitution provides under Section 5, Article X that:

“Each local government unit shall have the power to create sources of revenue and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to local governments.”

The Local Government Code however provides only the guidelines and limitations hence, each LGU should enact an enabling ordinance. Further, some of the provisions of the Code are not self-executory. Each LGU, through its Sanggunian (Sec 132), has to determine the base rates to be imposed, the subject of the revenues, the incentives, and penalties should they choose to penalize subjects against non-payment. The enabling Tax Ordinance, duly approved, serves as the authority of the Local Treasurer to collect revenues

b. Borrowings

Government borrowings are loans from domestic and foreign sources incurred to finance development projects.

C.What are the funds maintained by LGUs?

a. General Fund

Every LGU maintains a General Fund that is used to account for monies and resources as may be received and disbursed by the local treasury.

b. Special Funds

Special Education Fund

Trust Funds.

D.What is the budget process?

There are four major phases in the budget process?

1. Budget Preparation.

It starts from the time the local treasurer submits the Certified Statement of Income concerning the actual receipts of the past year and the first semester of the current year as well as the estimated income for the second semester of the current year. The budget preparation phase ends when the executive budget is submitted to the Sanggunian for authorization.

The issuance of the LCE of a directive in the form of budget call signals the start of the budget preparation.

2. Budget Authorization

This phase starts from the time the LCE submits to the Sanggunian for legislative deliberation and ends with the enactment of the corresponding appropriation ordinance, the legislative instrument authorizing the budget.

The Committee of Appropriations of the Sanggunian shall be responsible for conducting a preliminary review and evaluation of the executive budget. The committee may conduct its own budget hearing and may call upon the Local Finance Committee and heads of departments.

The Sanggunian may not increase the proposed amount in the executive budget nor include new items except to provide for statutory and contractual obligations that may not have been considered in the preparation of the budget, or that the amount provided may be deficient.

c. Budget Review

The primary purpose of the budget review is to determine the compliance of the enacted appropriation ordinance with the requirements set forth in the Local Government Code.

In the case of provinces, highly urbanized cities, independent component cities and municipalities within the Metropolitan Manila Area, the Secretary of the Sanggunian shall forward to the DBM, Regional Office for review the appropriation ordinance within three days after its approval. In the case of component cities and municipalities, to the Sanggunian Panlalawigan.

d. Budget Execution

This fourth phase involves the release and actual disbursement of funds appropriated for the performance of function and undertaking of projects and activities.

The critical aspect of this phase is the collection of funds such that disbursements do not exceed appropriations.

d. Budget Accountability

This involves the accurate recording and reporting of LGU’s income and expenditures and the evaluation of LGU’s physical and financial performance.

The fundamental principle prescribed on accountability is that fiscal responsibility must be shared by all those exercising authority over the financial affairs, transactions, and operations of the LGU.

a. What is the New Government Accounting System (NGAS) and the basic principles of government accounting?

The general accounting plan shows the overall accounting cycle in the LGU. Transactions shall emanate from the different departments of the LGU. These departments will provide the source documents and accounting forms leading to the perfection of the transaction, whether it be budgetary, collections or disbursements.

The NGAS was implemented only in January 2002 replacing the old system of government accounting which has been in use since the early 50’s. The shift was due to the “demand for real-time information, and more analytical reports.”

Government accounting encompasses the process of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt, disposition of government funds and property and interpreting the results thereof. (Sec. 109, {PD 1445)