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Section 5. Each local government unit shall have the power to create its own
sources of revenues 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 the local
governments;
Section 6. Local government units shall have a just share, as determined by law,
in the national taxes which shall be automatically released to them; and
Executive
Branch
Province
Governor
City
Mayor
Municipality
Mayor
Barangay
Captain
Sangguniang Barangay
- Barangay Captain
- 7 members elected at-large
Barangay
(PPPAs), define sectoral or functional objectives, set targets, collate and analyse data,
conduct studies, conduct public hearings, and monitor and evaluate PPPAs status.
The number of civil society representatives in the LDC should not be less than 25
percent of the total LDC regular membership. Serote (2012) suggests that the
composition of LDC-Sectoral Committees Technical Working Group (TWG) could grow
from the Core TWG, to an Expanded-TWG, and to a Full-Blown TWG as summarized in
Table 2.
In addition to the Core TWG, membership of the Sectoral Committees may expand to
include other government officials from the local and national levels operating in the
locality, and important non-government organizations whose functions and advocacies
are highly connected to the particular sector. In addition, the full-blown TWG may
include other groups and individuals from the non-government sectors who have a
stake in local development and who can enrich the committees capability.
Table 2. Suggested LDC-Sectoral Committees Composition (Serote 2012)
Sectoral
Core TWG (Must
Committee
be there)
Social
MPDO Staff
Development
MHO
LDC Rep.
(Barangay)
District Supervisor
Sanggunian
representative
SWDO
POSO
LDC representative
(CSO)
MPDO staff
Sports
organization
Religious leaders
Media
representative
Inner Wheel Club
Population Officer
Charitable
organizations
Nutrition Officer
Labor groups
NSO
Senior citizens
TMCA/YWCA
PTA Federation
Economic
PESO
Development
Tourism Officer
Full-blown
TWG (the more
the merrier)
School principals
Chamber of Commerce & Industry
Lions club
DTI Rep.
Rotary Club
Bank Managers
Jaycees
Academe
Other interested
Agriculturist
Trade Unions
groups
Other interested
groups &
individuals
Sanggunian Rep.
Environmenta MPDO staff
Sanitary Inspector
l Management
LDC representative CENRO
(barangay)
FARMC Representatives
General Services
Heads of private hospitals
Head
Academe
Sanggunian
Representative
PENRO
LDC
representative
(CSO)
Environmental
advocates
Other interested
groups &
individuals
BFAR representative
LG ENRO
Institutional MPDO staff
HRDO
Development
LDC representative Treasurer
(Barangay)
Budget Officer
LDC representative
Assessor
(CSO)
Academe
LGOO
Local
Religious groups
Good governance
advocates
Other interested
groups &
individuals
Administrator
Sanggunian
Representative
Additional 1% SEF
tax
Municipal Taxes
Amusement tax
Community tax
Barangay Taxes
Amusement tax
vans
Income tax on
advertisements
measures
Franchise tax
commercial breeding of
fighting cocks, on cockfights,
& on cockpits
Public utility
charges
Tax on business
Barangay clearance
fee
Tax on business of
printing & publication
billboards, signboards,
gravel
Tax on transfer of
advertisements
institutions
Professional tax
& charges
commercial breeding of
fighting cocks, on
charges
Service fees
Barangay
share
30%
30%
40%
50%
None
Basic Real
Property Tax
35%
40%
25%
Additional 1%
RPT for SEF
50% to
Provincial
School Board
50% to
Municipal
School Board
None
City taxes
City share
Barangay share
City taxes
Basic Real
Property Tax
30%
70%
40%,
where
quarry is
located
Basic Real
Property Tax
35%
35%
30%
50%
50%
None
The LCE puts together the different department budgets into the proposed annual
budget, with the technical assistance of the LFC composed of the Treasurer, the
Planning and Development Officer, and the Budget Officer. The membership of the LFC
shows that the budget preparation phase is a closed process. No citizens, individuals or
groups who are not officials or employees of the local government may participate in
this stage of the budget process. The proposed budget is then submitted to the
Sanggunian not later than October 16 for approval into a Budget Ordinance. The
Sanggunian led by the Vice-Governor or Vice-Mayor, exercises the power to legislate
the annual budget into an ordinance on the basis of the estimates of income and
expenditures submitted by the LCE.
th
The power to review the annual and supplemental budgets of component cities and
municipalities is vested on the Sangguniang Panlalawigan where the
cities/municipalities belong. The Department of Budget and Management (DBM)
exercises the power to review the annual and supplemental budget ordinances of
provinces, highly-urbanized cities, independent component cities, and municipalities
within Metro Manila. Budgets of cities and provinces, in turn, are reviewed by the
Secretary of the Department of the Interior and Local Government (DILG). The purpose
of the review is to ensure compliance with the budgetary requirements and general
limitations set forth in Sections 324 and 325, respectively, of the 1991 Local
Government Code. The budgetary requirements and general limitations that must be
complied with in annual budgets are summarized in the Table 5 below.
Table 5. Budgetary Requirements and General Limitation on Local Budgets set in
RA 7160
Legal basis
Details of Provisions
estimates of income;
The annual Discretionary Fund of the LCE shall not exceed two
percent (2%) of the actual receipts derived from basic real property
tax in the next preceding calendar year.
Budget execution and budget accountability are vested primarily on the LCE. Additional
or supplemental budget proposals may be proposed by the LCE duly supported by new
or additional income or revenue sources as certified by the Local Treasurer. In case of a
calamity, a supplemental budget by way of budgetary realignment may be proposed by
the LCE to set aside appropriations for the purchase of exceptionally urgent supplies
and materials, and payment of indispensable services for use in areas of the LGU
declared by the President to be in a state of calamity.
In revenue generation, the LCE is tasked to initiate the general revision of real property
assessment values, the updating of the revenue code and the codification of tax
ordinances. It should also initiate the submission to the Sanggunian of a list of
delinquent taxpayers and the posting of notice of tax delinquency (COA AFR 2012:121).
The LCE and his financial team are then in charge of implementing the annual budget.
The local financial management team must maintain a system of accounting and
reporting which provides for the necessary internal controls to ensure that transactions
are properly authorized, recorded, assets are safeguarded against unauthorized use or
disposition, and liabilities recognized (2011 COA AFR:37). The expanded financial
management team in each LGU is composed of the following government officials:
The LPDO, the Budget Officer, and the Local Treasurer are members of the Committee
LFC. The LFC is highly active during budget preparation and budget legislation as it
makes income estimates, recommends appropriate tax and other revenue or borrowing
measures to support the budget, and recommends to the LCE the level of annual
expenditures and spending ceilings based on the approved LDP. In budget execution,
the Budget Officer exercises the authority to certify the existence of a duly approved
appropriation in support of every disbursement. The Accountant is duty bound to
obligate said appropriation. The Treasurer certifies to the availability of funds for the
purpose.
The barangay budget system
At the barangay level, the income of each barangay accrues to the Barangay General
Fund. Ten percent of the general fund of the barangay is set aside for the <i>
Sangguniang Kabataan </i> (Youth Council).
The power to prepare the barangay budget is exercised by the Barangay Chairman,
who proposes the barangay budget for the ensuing fiscal year, and submits this to the
Sangguniang Barangay for legislative enactment. The Barangay Chairman bases the
proposed budget on the statement of income and expenditures prepared by the
Barangay Treasurer also on the basis of the statement of income and expenditures
issued by the city/municipal treasurer. In turn, the Sangguniang Barangay exercises the
power to approve the budget into a barangay ordinance.
Local enterprise system
Local governments may own public utilities and economic enterprises such as public
markets, slaughterhouses, transport terminals, cemeteries, water systems, and the like.
Such utilities and economic enterprises shall be operated and maintained independently
of the LGU concerned. This means that the local enterprises generate their own
income, maintain their respective budgets, appropriate for salaries, wages,
representation and transportation allowances of officials and employees of the public
utilities and economic enterprises. The appropriations for the personal services of
economic enterprises shall be charged to their respective budgets and are excluded in
the annual budget of the LGU and in the computation of the maximum amount of
allocation for personal services.
Local government loans and loan-financed projects
Title IV of RA 7160 authorized LGUs to incur debt and avail of credit facilities to finance
local infrastructure and other socio-economic development projects. Debt-funded
projects must be in accordance with the approved Local Development Plan and the
Public Annual Investment Program.
Interestingly, Section 296 on the general policy on incurring LGU debt does not specify
the entity (LCE or the Sanggunian) that may exercise such power. Section 297 on
Loans, Credits, and Other Forms of Indebtedness of LGUs also did not specify who is
to exercise such authority to incur loans, credits and other forms of indebtedness with
any government or domestic private banks and other lending institution. Section 298
likewise did not specify who, between the LCE and the Sanggunian, may enter into
Deferred-Payment and other Financial Schemes.
In the case of bond flotation, the Sanggunian is identified to exercise the power to
approve and state the purpose, terms and conditions for bond flotation. In inter-LGU
loans, grants and subsidies, the Sanggunian of the LGU concerned is the approving
authority. The exercise of power to borrow by local governments is limited by the
provision on debt service allocation, which sets an amount not to exceed 20 percent of
the regular income of the LGU concerned at the same time that it must fully provide for
all statutory and contractual obligations.
The Department of Finance-Bureau of Local Government Finance (DOF-BLGF) sets
guidelines on local government borrowing renders technical assistance and determines
LGU creditworthiness. As of 2008, LGU borrowing of PhP 5.196 billion comprised 1.89
percent of total LGU income (Padilla, May 2010). While the amount of annual local
borrowing as a percentage of total annual local income may yet be considered relatively
low, the nominal amount is already significant and there is much evidence that LGUs
have increasingly tapped borrowing as a fiscal tool. As of 2011, the total loans payable
of LGUs a total of PhP 72.039 billion, of which PhP 36.906 billion (or 51.2 percent) is
payable to the Land Bank of the Philippines (COA AFR 2011).
Citizen participation in local special bodies
In the LDC and in the Sanggunian, civil society representation is mandatory. In other
local special bodies such as the Local School Board (LSB), Local Health Board (LHB),
Prequalification, Bids and Awards Committee (PBAC), and the Local Peace and Order
Council (LPOC), the participation of civil society organizations (CSOs) and the private
sector may be made possible through the passage by the Sanggunian of rules on
CSO/private sector accreditation and guidelines on citizen participation and
representation in local special bodies.
Citizen participation in the LSB is important because the LSB exercises the power over
the preparation, deliberation and approval of the Special Education Fund (SEF) Budget.
The LSB determines the annual supplementary budgetary needs for the operation and
maintenance of public schools within the LGU. It is noted that the SEF Budget is not
approved by the Sanggunian, but instead by the LSB, which is chaired by the governor
or mayor and the school supervisor. Citizen representation could be expanded to
include representatives from the women, youth and cultural sectors, among others.
Table 6. Composition of the Local School Board (RA 7160)
Local School Board:
Chairmen
Members
Chairman of the Education Committee of the Sangguniang
Panlalawigan
Provincial treasurer
Co-Chairmen:
Co-Chairmen:
City Mayor and
City Superintendent of
Schools
Co-Chairmen:
Chairman: Governor
Vice-Chairman:
Provincial Health
Officer
Members
Chairman of the Committee on Health of the
Sangguniang Panlalawigan
Representative from the private sector or nongovernmental organizations involved in health
services, and
Representative of the Department of Health in
the province
Municipal Health
Board
Chairman: Municipal
Mayor
Vice-Chairman:
Municipal Health
Officer
Public Bids and Awards Committee and the local procurement system
The Public Bids and Awards Committee (PBAC) is present in every province, city and
municipality, and is assigned the power and authority to ensure the prequalification of
contractors, bidding, the evaluation of bids, and the recommendation of awards
concerning local infrastructure projects. The chair is the Governor or Mayor, and the
following are members.
Representative of the minority party in the Sanggunian, or one (1) chosen by the
Sanggunian from among its members;
Local treasurer;
bidding
Personal
canvass
nd
rd
th
st
th
th
2 & 3 class
P40,000
nd
rd
Citizens and taxpayers have the right and the responsibility to exact accountability from
government. Citizen participation is a partnership between the people, the government,
the private sector and all other sectors of society. While government is expected to be
honest and efficient, the reality is that substantial amount of government resources are
wasted in illegal expenditures resulting in low quantity and low quality public services
leading to poorer quality of life. In pursuit of good governance, all sectors of society
have a part to play in ensuring societys growth and protection. Government typically
performs better under informed public scrutiny and citizens needed to participate in
fiscal processes as major stakeholders.
Citizen participation can only be effective if government legislates for it. On one hand,
local governments must pass orders, ordinances, rules and regulations defining the
mechanisms through which participation may happen. It must accredit civil society
organizations (CSOs) where necessary; activate local special bodies, and allow CSOs
full membership in the local special bodies and in the Sanggunian, and not just as
observers, as mandated in the Local Government Code.
On the other hand, citizens and CSOs must have the willingness to perform their role as
citizens. They should develop awareness of the scope of authority of the local
government, its officials, its programs, projects and activities. They should strive to
acquire the technical knowledge and skills that may help them exercise responsible
citizenship. People should develop a sense of belonging to local government, and a
concern for what is happening in the local community, neighbouring localities, and
beyond.
Periodic visits to the barangay hall, city/municipal hall and provincial capitol can help
build knowledge on projects and activities undertaken by local governments. Listening
to broadcast media (radio and television), reading newspapers, becoming aware of
activities in the neighbourhood, visiting the barangay hall on a regular basis, joining
associations of residents, and participating in community events could be done with
very little effort or at little extra cost.
Among the websites that citizens may access to monitor government projects and
activities are the websites of the DBM, the National Economic Development Authority
(NEDA), COA, DOF, DILG and their respective local governments.
The DBM publishes in its website information on the General Appropriations Act, which
contains information on the IRA and similar allocations to LGUs. The NEDA website
contains information on Official Development Assistance (ODA) and ODA-funded
programs and projects intended for local governments. The DOF website is a wealthy
source of information on the countrys fiscal performance and the governments fiscal
policy, with links to the websites of DOF-bureaus and attached agencies including the
Bureau of Local Government Finance (BLGF). The BLGF website is amply loaded with
information on policies, assistance, services, facilities and related information that are
useful to local governments.
The DILG website is a rich source of information on policy issuances and comparative
information on LGU performances and very useful information of interest and benefit to
LGUs. The COA website contains findings on audit of operations of all government
agencies including local governments. There is much information that citizens can
access that will truly help them better understand and appreciate their local
governments.
Local governments have their respective websites which they have to populate with
relevant information particularly on the budget and their financial performance. The
posting on bulletin boards and websites of the financial statements and reports and
similar documents of LGUs has been required by the DILG under the Full Disclosure
Policy. LGUs are duty bound to comply with this directive.
It is now up to citizens and civil society organizations to examine the programs and
performance of LGUs using this information. Citizens can take pro-active stance in
requiring the LGU to comply with the provisions in the 1991 Local Government Code on
citizen participation and participate in the overall management of the local government
through the Sanggunian, local special bodies, and similar mechanisms that the LGUs
have created. Citizen Action Network for Accountability
REFERENCES
Padilla, Alvic. May 24, 2010. Understanding Incomes and Expenditures of Local Government Units. www.transparencyreporting.net.
Serote,
Ernesto.
18
April
2012.
Planning
in
Local
Governance.
UP
SURP.
Land
Equity
International,
accessible
through www.landequity.com.ph.
United States Agency for International Development (USAID). 2009. Power of the Purse Reform in the Philippines: Proposed Revisions to
the 1987 Administrative Code. July 2009, pp. 1-24, accessible through http://incitegov.org/wp-content/uploads/2011/05/INCITEGov-Power-ofthe-Purse.pdf.
Commission on Audit. 2011 Annual Financial Report of Local Government Units.
Commission on Audit. COA Manual on the New Accounting System for use in LGUs under COA Circular No. 2002-003 issued on June 20,
2002.
Department of Budget and Management. 2008. DBM-issued Updated Budget Operations Manual (UBOM) for LGUs.
Department of Finance-Bureau of Local Government Finance (DOF-BLGF). Statement of Receipts and Expenditures.
Department of the Interior and Local Government. DILG Memorandum Circular No. 2010-83 issued on August 31, 2010 Full Disclosure
Policy (FDP) of Local Budget and Finances, and Bids and Public Offerings
DBM and DILG Joint Circular No. 1, s 2005 dated 20 September 2005.
DILG-MC No. 2011-02 issued on April 27, 2011, creating the Performance Challenge Fund.
1987 Philippine Constitution.
Executive Order No. 292 or the Administrative Code of 1987.
RA 6957 or the Build-Operate-Transfer (BOT) Law, as amended by RA 7718.
RA 7160 or the 1991 Local Government Code.
RA 10121 Philippine Disaster Risk Reduction & Management (PDRRM) Act of 2010