A.

Introduction

In order to determine the probability of subsistence of one local government unit,

we have to take a look at its fiscal administration. Fiscal administration consists of
monitoring and approval of budgets, tax ordinances and other fiscal measures.

What is an Executive Budget?

It is the Local Government Unit (LGU)’s financial plan and instrument for
implementing the local development plan and its investment program. It is prepared
after due deliberation from the different departments/ offices equitably allocating the
limited resources of the LGU amongst the various programs and projects and
subjected to further executive review.

Why is it important for the LGUs to have a budget?

The preparation of budget by the government is important because it enables the

government to plan and manage its financial resources to support the implementation
of various programs and projects that best promote the development of a country.
Through the budget, the government can prioritize and put into action its plans,
programs, and policies within the constraints of its financial capability as dictated by
economic conditions.

Once a budget has been successfully drawn, its purpose doesn’t cease but begins.
Effective fiscal administration uses a budget for monitoring how closely the LGU is
meeting its objectives in terms of its finances. Comparisons of actual income and
expenditure against the budgeted income and expenditure need to be done regularly.
This can be done through a variance report. A variance report will be shown later, to
determine the effectiveness of an LGU’s fiscal administration.

B. Local Government Unit in Focus

Brief Background

La Paz is a 3rd class municipality in the province of Tarlac, Philippines.

According to the latest census, it has a population of 61,324 people in 10,361
households.

La Paz lies on the southeast portion of the province of Tarlac, about 144.6 km
from Metro Manila, 19.6 km from the provincial capital (Tarlac City) and 78.6 km
from the regional center (South of Concepcion and Fernando City). It is bounded on
the north by the town of Victoria, on the east by the Province of Nueva Ecija, on the
south by the town on the west by Tarlac City.
 The municipality has a total land area of 114.33 km², which represents 2.34%
of the entire provincial area. La Paz is politically subdivided into 18 barangays, of
which barangays San Isidro and San Roque are considered as urban areas and the rest
of the barangays are considered rural areas.

C. Goals and Objectives

The municipality expects to attain the following objective during the plan period:

1. To increase agricultural productivity and enhance delivery of health care services.

2. To provide accessibility to all basic needs and services requirements to a realistic

percentage of citizens/ constituents of the municipality.

3. To provide expanding employment opportunities among the urban poor residents

4. To increase income per capita by a stated percentage which is realistic.

D. Local Budget Sectoral Categories

The General Fund Budget is allocated as follows in three (3) given years:

2007 2006 2005

SECTOR AMOUNT
43,556,072.3 35,792,612.8 29,998,838.7
GENERAL PUBLIC SERVICES 9 2 2
8,053,388.9 6,082,179.8 7,380,434.1
SOCIAL SERVICES 5 9 9
13,291,820.7 8,178,691.1 10,487,017.0
ECONOMIC SERVICES 5 2 8
OTHER PURPOSES-5 % CALAMITY 443,750.0 1,895,433.9 2,164,651.0
FUND 0 3 0
71,000.0 71,000.0 71,000.0
AID TO BARANGAY 0 0 0
65,416,032.0 52,019,917.7 50,101,940.9
TOTAL 9 6 9
Figure 1: Distribution of General Fund Budget by sector for the year 2007.

DISTRIBUT

20%

Figure 2: Distribution of General Fund Budget by sector for the year 2006

12%
 DISTRIBUT

4% 0%

16%
Figure 3: Distribution of General Fund Budget by sector for the year 2005.

DISTRIBUT

12% 4% 0%

21%
 General Public Services

The amount allocated for this sector will be distributed to programs that will
promote public order and public safety, administrative and legislative support services for
the regulatory functions of the municipality.

Social Services

The amount is provided for the delivery of quality public education, health care
services, employment programs, and social services and welfare. Beneficiaries of social
services and welfare allocations are the members of the marginalized sector of the
municipality.

Economic Services

The allocations of this sector include the 20% of the Internal Revenue Allotment
for the priority development project of the municipality and for its completion. Included
in the budget is intended for Housing Programs, Environmental Projects, Solid Waste
Management, and Agricultural Services.

Figure 4: Distributions of the General Fund Budget By Sectors For the Three (3) –
Year Period (2005- 2007)

DISTRIBUTI
FOR THE

45,000,000.00

40,000,000.00
INCR
35,000,000.00
 The allocation of budget to the different sectors at variable amounts for each year
in the three- year period as determined by the fiscal administrators based on their policies
and goals each year is indicative of the flexibility of La Paz’s budget.

An LGU’s fiscal administration should be able to allocate resources to achieve

government priorities, goals and policies and stabilizes the economy through fiscal
policy, mixture of expenditures, revenue and debt financing, in tandem with monetary
policy.

With reference to the graph seen above, it is to be noted that based on actual
distribution of budget, some amounts tend to behave in a trend-like manner. The General
Public Services Sector has an increasing amount while the 5% Calamity Fund has a
decreasing amount and the rest have fluctuating values. The trend observe amongst this
sectors would serve as a good basis for future budgeting by the fiscal administrators.

E. Distribution of Budget by Major Expenses Class

EXPENDITURES 2005 2006 2007

18,240,710. 20,584,328. 22,309,264.
PERSONAL SERVICES 54 72 48
MAINT. & OTHER OPER. 15,043,518. 17,283,246. 24,539,279.
EXPENSES 59 85 15
1,334,096. 839,712. 2,245,266.
CAPITAL OUTLAY 00 32 39
15,483,615. 13,312,629. 16,322,222.
NON- OFFICE EXPENDITURES 86 87 07
50,101, 52,019, 65,416,
TOTAL 940.99 917.76 032.09

►Included in the Non- office Expenditures are the 20% Economic Development
Fund, 5% Calamity Fund, Aid to Barangays and Program Services.

FINANCIAL CONDITION: PRESENTATION AND ANALYSIS

Introduction

The financial statements of the municipality and financial information herein prescribed
have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP)
and Standards.

References to financial statements and schedules particularly the Statement of Income

and Expenditures and Statement of Appropriation, Allotment and Obligation has been made
relative to the review of presentation, discussion and analysis in this report.
Results of operations:

REVENUES/ INCOME

2007 2006 2005

Internally- generated Revenue 6,832,247.00 7,633,935.17 9,884,887.45

IRA 50,757,358.00 49,479,685.88 42,034,533.00
Total Income 57,589,605.06 57,113,621.05 51,919,420.45

It can be determined from the above presentation that 88.14% in 2007, 86.63% in 2006
and 80.96% in 2005 of the realized income came from Internal Revenue Allotment while the
remaining balance equivalent to 11.86% in 2007, 13.37% in 2006 and 19.04% in 2005 was from
the collection of local taxes, fees and other charges.

The table seen below is a detailed schedule of the different sources of revenues and other
resources utilized by the municipality of La Paz for three comparative years.

Schedule 1:
COMPARATIVE REPORT OF INCOME

2005 2006 2007

5,711,414.2 2,767,716.3
1.0 BEGINNING BALANCE 2 5 -
2.0 INCOME
2.1 TAX REVENUE (specify)
996,676.4 1,062,523.4 1,290,368.0
Business Tax 8 1 6
343,573.1 454,699.2 433,171.9
Community Tax 3 4 2
239,751.8 172,360.0 130,259.2
Franchise Tax 0 0 4
6,530.0 6,320.0
Occupation Tax 0 5,930.00 0
313,284.1 294,994.2 337,700.3
Real Property Tax 8 3 5
2,468.4 24,972.9 288,439.7
Other Local Taxes 2 3 7
64,323.4 17,940.0
Fines and Penalties - Local Taxes 6 - 0
15,610.0 13,592.0 16,316.5
Fees on Weights and Measure 0 0 0
Motor Vehicles Users Charge - - -
106,605.0
Motor Vehicles Sticker 0 - -
19,410.0 13,663.0 45,427.5
Fines and Penalties – Permits and Licenses 0 1 4
42,034,533.0 49,479,685.8 50,757,358.0
Internal Revenue Allotment 0 8 0
TOTAL TAX REVENUE 44,142,765.4 51,522,420.7 53,323,301.3
 7 0 8
2.2 OPERATING AND MISCELLANEOUS
REVENUES
87,249.6 92,303.5 93,922.5
Clearance and Certification 0 0 0
32,537.0 33,750.0 34,159.5
Garbage Fee 0 0 0
212,831.2 207,400.8 248,670.4
Inspection Fee 8 1 0
78,166.0 439,869.9
Other Government Income 0 4 -
905,427.0
Other Service Income - - 2
31,587.5 32,972.5 54,042.5
Cemetery Receipts 0 0 0
Income from Communications Services - - -
1,181,132.2 1,783,060.9 2,648,475.2
Income from Waterworks System 2 5 7
286,473.0 234,126.3 281,606.4
Interest Income 0 0 9
155,264.1
Miscellaneous Receipts 6 - -
TOTAL OPER & MISCELLANEOUS 2,065,240.7 2,823,484.0 4,266,303.6
REVENUE 6 0 8
2.3 CAPITAL REVENUE - - -
TOTAL CAPITAL REVENUE - - -
2.4 GRANTS - - -
2.5 EXTRA- ORDINARY INCOME - - -
2.6 BORROWING (Loans Receivables, LBP) - - -
46,208,006.2 54,345,904.7 57,589,605.0
TOTAL INCOME (2.1 TO 2.6) 3 0 6
TOTAL AVAILABLE RESOURCES FOR 51,919,420.4 57,113,621.0 57,589,605.0
APPROPRIATION 5 5 6

The increase in Total Revenues was primarily due to the increase of the Internal Revenue
Allotment each year. From Php42,034,533.00 in 2005, it was increased by Php7,445,152.88 in
2006 and subsequently increased by Php1,277,672.12 in 2007 to arrive at the amount of
Php50,757,358.00.

Internally-generated income may only comprise about 12-20% of the total income, but it
is also important to note that increases in most income from taxes and non-tax charges helped
elevate the total income as well. Income from Waterworks, Other Local Taxes, Business Tax,
Community Tax, and Cemetery Receipts have continuously experienced percentage increase of
more than 20% from year 2005 to 2007. Refer to breakdown of increases and decreases of
income on table below.

PERCENTAGE INCREASE in INCOME

(base year 2005) 2006 2007
Other Local Taxes 911.70% 11585.20%
Fines and Penalties - Permits and Licenses -29.61% 134.04%
Income from Waterworks System 50.96% 124.23%
Cemetery Receipts 4.38% 71.09%
Business Tax 6.61% 29.47%
 Community Tax 32.34% 26.08%
Internal Revenue Allotment 17.71% 20.75%
Inspection Fee -2.55% 16.84%
Real Property Tax -5.84% 7.79%
Clearance and Certification 5.79% 7.65%
Garbage Fee 3.73% 4.99%
Fees on Weights and Measure -12.93% 4.53%
Interest Income -18.27% -1.70%
Occupation Tax -9.19% -3.22%
Franchise Tax -28.11% -45.67%
Fines and Penalties - Local Taxes -100.00% -72.11%
BEGINNING BALANCE -51.54% -100.00%
Other Government Income 462.74% -100.00%
Miscellaneous Receipts -100.00% -100.00%
Motor Vehicles Sticker -100.00% -100.00%

EXPENDITURES:

2007 2006 2005

Personal Services 22,309,264.48 20,584,328.72 18,240,710.54

Maintenance and
Operating Expenses 24,539,279.15 17,283,246.85 15,043,518.59

Capital Outlay 2,245,266.39 839,712.32 1,334,096.00

Non-Office 16,322,222.07 13,312,629.87 15,483,615.86

Expenditures

Total Expenditures 65,416,032.09 52,019,917.76 50,101,940.99

It can be garnered based on the presented amounts above those personal services and
maintenance and operating expenses consist of the greater portion of the expenditures of an
LGU’s budget. Personal services comprised 34.10% of the total expenditures for 2007, 39.57%
for the year 2006, and 36.41% for the year 2005. Maintenance and Operating Expenses consist of
37.51% of the total expenditures of La Paz for 2007, 33.22% for the year 2006, and 30.03% for
the year 2005. Together, these two expenses cover 66- 74% of the total expenditures.

Below is a detailed schedule of the expenses under Personal Services. It is to be

observed that amounts in Personal Services are usually correlated with each other which make
this portion of the expenditures highly predictive.
Schedule 2:

COMPARATIVE REPORT OF PERSONAL SERVICES

A. Personal Services 2005 2006 2007

10,704,847.5 11,181,795.3 11,459,144.7
Salaries and Wages 2 3 5
438,000.0 471,500.0 453,500.0
Personnel Economic Relief Allowance 0 0 0
510,000.0 1,611,500.0 1,566,977.2
Additional Compensation (AO#53) 0 0 7
839,440.0 918,700.0 1,082,580.0
Representation Allowance (RA) 0 0 0
839,440.0 918,700.0 1,082,580.0
Travelling Allowance (TA) 0 0 0
340,000.0 372,000.0 356,000.0
Clothing Allowance 0 0 0
189,600.0 171,000.0 166,650.0
Subsistence Allowance (SA) 0 0 0
17,900.0 20,250.0 23,549.1
Laundry Allowance (LA) 0 0 9
140,000.0 160,000.0 152,000.0
Productivity Incentive Benefits 0 0 0
31,400.0
Hazard Pay - - 0
425,000.0 447,160.0
Cash Gift 0 - 0
1,314,069.0 452,000.0 988,782.5
Year-End Bonus 0 0 0
1,757,385.7 909,079.5 2,064,134.0
Life & Retirement Insurance Contributions 8 0 8
97,315.6 1,327,855.2 100,130.1
PAG-IBG Contributions 4 0 6
124,137.5 103,317.7 119,037.5
PHILHEALTH Contributions 0 1 0
81,223.7 126,450.0 80,905.5
ECC Contributions 2 0 5
84,078.8 2,127,160.4
Terminal Leave Benefits - 5 0
412,890.3 1,097,015.4
Monetization 4 9 -
9,461.0 650,000.0 7,573.0
Extra Hazard Premium 4 0 8
Loyalty Award - 9,086.64 -
18,240,710.5 20,584,328.7 22,309,264.4
TOTAL PERSONAL SERVICES 4 2 8

The total expenditures for Personal Services is within the PS limit computed 45% of the
total income from regular sources realized from the next preceding fiscal year of this
municipality.

Schedule 3:
COMPARATIVE REPORT OF MAINTENANCE & OTHER OPERATING EXPENSES

B. Maintenance & Other Operating Expenses 2005 2006 2007

548,558.8
Travelling Expenses- Local 8 658,361.80 811,296.00
417,404.0
Research Seminar & Training Expenses 0 437,055.20 519,158.00
Scholarship Expense - - -
818,328.5
Office Supplies Expense 0 954,849.30 1,216,505.00
50,130.0
Accountable Forms 0 79,833.60 141,208.40
1,549,902.7
Gasoline, Oil & Lubricant Expense 8 2,020,930.37 2,941,445.91
623,507.3
Other Supplies Expense 0 851,115.19 1,216,505.00
1,967,915.5
Electricity Expense 7 2,189,981.94 2,731,235.53
2,190.0
Postage and Deliveries 0 2,900.00 -
255,066.6
Telephone Expense- Landline 3 217,027.43 215,427.48
88,321.8
Telephone Expense- Mobile 4 177,207.90 411,193.79
14,600.0
Membership Dues & Contri. To Org. 0 40,300.00 75,600.00
28,300.0
Advertising Expense 0 73,000.00 36,500.00
21,000.0
Printing and Binding Expense 0 44,580.58 24,040.00
8,768.0
Subscription Expense 0 1,958.00 264.00
186,029.0
Auditing Services 0 193,239.00 315,914.00
3,238,058.0
General Services 0 3,348,691.50 3,816,349.00
1,020,527.0
Janitorial Services 0 1,011,016.00 1,005,069.50
592,995.5
Security Services 0 425,448.00 490,147.00
111,263.0
Other Professional Services 0 217,000.00 454,703.50
2,030.0
Miscellaneous Expenses 0 12,500.00 74,940.00
67,522.8
Repair & Maint.- Power Elect'n & Energy Structures 0 71,975.00 246,740.00
368,594.7
Repair & Maint.- Office Buildings 5 282,361.50 157,942.50
4,550.0
Repair & Maint.- Office Equipment 0 130,546.00 2,300.00
27,730.0
Repair & Maint.- IT Equipment and Software 0 53,395.00 89,735.00
422,604.5
Repair & Maint.- Const. & Heavy Equipment 0 596,618.24 664,307.50
214,434.9
Repair & Maint.- Motor Vehicles 0 48,535.12 123,502.75
Repair & Maint.- Other Transpo. Equipment 33,000.0 127,774.00 -
 0
711,025.2
Repair & Maint.- Parks, Plaza & Monuments 9 196,275.00 324,202.00
150,510.0
Repair & Maint.- Pumping Stations/ Water Facilities 0 64,602.63 754,498.00
72,672.6
Repair & Maint.- Irrigation Canals & Laterals 5 383,732.00 1,464,532.59
92,300.0
Grants & Donations 0 - 972,677.20
Intelligence Expenses - - 111,697.05
Fidelity Bond Premium - 17,060.00 42,829.62
Insurance Expenses (Bantay Bayan, Med. Para 385,916.4
Masa) 0 1,159,385.64 1,318,009.44
Other Maint. & Other Operating Expenses 2%
discretionary Fund - - -
Other Maint. & Other Operating Expenses 947,761.3
(Honoraria) 0 - -
Other Maint. & Other Operating Expenses - 1,193,990.91 1,768,803.39
TOTAL MAINT. & OTHER OPERATING 15,043,518.5
EXPENSES 9 17,283,246.85 24,539,279.15

Schedule 4:

COMPARATIVE REPORT OF CAPITAL OUTLAY

5.2 CAPITAL OUTLAY 2005 2006 2007

LAND AND LAND IMPROVEMENT OUTLAY - - -
BUILDING & STRUCTURE OUTLAY - - -
130,000.0
Purchase of Const. &Plum. Mat'ls & Equipments - 0 -
EQUIPMENT OUTLAY - - -
1,170,000.0
Purchase of Service/Motor Vehicle 0 - -
Purchase of Camera - - -
58,500.0
Purchase of Personal Computer 0 - -
33,000.0 120,000.0
Purchase of Fire Extinguisher 0 0 -
Purchase of Tables & Chairs, Filing Cabinet, 100,000.0
Ceiling Fan, Airconditioner - 0 -
72,596.0 60,000.0
Purchase of Curtains 0 0 -
Purchase of Generator Set - - -
INVESTMENT OUTLAY - -
Water System Project - -
LOANS OUTLAY - -
429,712.3 2,245,266.3
Loans Amortization - 2 9
1,334,096.0 839,712.3 2,245,266.3
TOTAL CAPITAL OUTLAY 0 2 9
Schedule 5:

COMPARATIVE REPORT OF NON- OFFICE EXPENDITURES

5.3 NON-OFFICE EXPENDITURES 2005 2006 2007

71,000.0 71,000.0 71,000.0
Subsidy to Local Gov't- Aid to 21 Brgys 0 0 0
10,704.5 18,644.9 50,583.0
Subsidy to Nat'l Gov't Agency- Aid to POPCOM 0 0 0
119,474.5 200,000.0 79,750.0
Subsidy to NGOs/Pos/Skills Training Prog. (GAD) 0 0 0
5,240,002.7 5,955,576.6 5,221,385.5
Program Services (Health, Agri., Social Services) 8 2 0
7,877,783.0 5,171,974.4 10,105,753.5
20% Development Fund 8 2 7
2,164,651.0 1,895,433.9 443,750.0
5% Calamity Fund 0 3 0
350,000.0
Reserve for Election Expense - - 0
15,483,615.8 13,312,629.8 16,322,222.0
TOTAL NON-OFFICE EXPENDITURES 6 7 7

The amount reserved for calamity fund is derived from 5% of the regular income sources,
to cover unforeseen expenditures which may arise from the occurrence of calamity within the
locality or in other areas declared to be in a state of calamity.

Allocations of the 20% development fund is intended for implementing and completion
of priority development projects embodied in the Annual Investment Plan.

Pursuant to Republic Act No. 7192 and Joint Circular No. 2003-01 of the Department of
Budget and Management and Department of Social Welfare and Development, an amount
equivalent to Php200,000.00 has been appropriated to support gender related programs and
activities of Non- Government Organizations (NGOs), Peoples Organizations (Pos), non- Formal
Education (NFEs), Senior Citizen Organizations and Disabled Persons.

The total expenditures greatly diminished because most expenses had a decrease of 100%
from expenses incurred in base year 2005. Most savings originated from diminished Repairs and
Maintenance Expenses. Telephone expenses may have decreased by 15.54% for 2007, but there
was a corresponding increase in Telephone Expenses- Mobile of 365.56% for 2007. There is also
a consistent decrease in the allocation for the 5% Calamity Fund because of the decrease in
regular sources to which it is correlated. Refer to table below for details of the increases and
decreases in expenses.

PERCENTAGE INCREASES (DECREASE) of EXPENSES

(base year 2005) 2006 2007
Miscellaneous Expenses 515.76% 3591.63%
Repair & Maint.- Irrigation Canals & Laterals 428.03% 1915.25%
Grants & Donations -100.00% 953.82%
Membership Dues & Contri. To Org. 176.03% 417.81%
Repair & Maint.- Pumping Stations/ Water Facilities -57.08% 401.29%
Subsidy to Nat'l Gov't Agency- Aid to POPCOM 74.18% 372.54%
Telephone Expense- Mobile 100.64% 365.56%
Other Professional Services 95.03% 308.67%
Repair & Maint.- Power Elect'n & Energy Structures 6.59% 265.42%
Insurance Expenses (Bantay Bayan, Med. Para Masa) 200.42% 241.53%
Repair & Maint.- IT Equipment and Software 92.55% 223.60%
Additional Compensation (AO#53) 215.98% 207.25%
Accountable Forms 59.25% 181.68%
Other Supplies Expense 36.50% 95.11%
Gasoline, Oil & Lubricant Expense 30.39% 89.78%
Auditing Services 3.88% 69.82%
Repair & Maint.- Const. & Heavy Equipment 41.18% 57.19%
Office Supplies Expense 16.68% 48.66%
Travelling Expenses- Local 20.02% 47.90%
Electricity Expense 11.28% 38.79%
Laundry Allowance (LA) 13.13% 31.56%
Advertising Expense 157.95% 28.98%
Representation Allowance (RA) 9.44% 28.96%
Travelling Allowance (TA) 9.44% 28.96%
20% Development Fund -34.35% 28.28%
Research Seminar & Training Expenses 4.71% 24.38%
General Services 3.42% 17.86%
Life & Retirement Insurance Contributions -48.27% 17.45%
Printing and Binding Expense 112.29% 14.48%
Salaries and Wages 4.46% 7.05%
Cash Gift -100.00% 5.21%
Clothing Allowance 9.41% 4.71%
Personnel Economic Relief Allowance 7.65% 3.54%
PAG-IBG Contributions 1264.48% 2.89%
Subsidy to Local Gov't- Aid to 21 Brgys 0.00% 0.00%
Program Services (Health, Agri., Social Services) 13.66% -0.36%
ECC Contributions 55.68% -0.39%
Janitorial Services -0.93% -1.51%
PHILHEALTH Contributions -16.77% -4.11%
Telephone Expense- Landline -14.91% -15.54%
Security Services -28.25% -17.34%
Year-End Bonus -65.60% -24.75%
Subsidy to NGOs/Pos/Skills Training Prog. (GAD) 67.40% -33.25%
Repair & Maint.- Motor Vehicles -77.37% -42.41%
Repair & Maint.- Office Equipment 2769.14% -49.45%
Repair & Maint.- Parks, Plaza & Monuments -72.40% -54.40%
Repair & Maint.- Office Buildings -23.40% -57.15%
5% Calamity Fund -12.44% -79.50%
Subscription Expense -77.67% -96.99%
Monetization 165.69% -100.00%
Purchase of Service/Motor Vehicle -100.00% -100.00%
Other Maint. & Other Operating Expenses (Honoraria) -100.00% -100.00%
Repair & Maint.- Other Transpo. Equipment 287.19% -100.00%
Purchase of Fire Extinguisher 263.64% -100.00%
Purchase of Curtains -17.35% -100.00%
Purchase of Personal Computer -100.00% -100.00%
Postage and Deliveries 32.42% -100.00%
The Internal Revenue Allotment

According to Section 284 of the Local Government Code of the Philippines (RA 7160),
Internal Revenue Allotment (IRA) is a local government’s share of revenues from the national
government. It is largely based on land area and population.

Schedule 6:
COMPARATIVE REPORTS OF INCOME AND EXPENDITURES
(INTERNALLY GENERATED INCOME ONLY)

2005 2006 2007

REVENUES (INTERNALLY- 9,884,887.4 7,633,935.1 6,832,247.0
GENERATED) 5 7 6
50,101,940.9 52,019,917.7 65,416,032.0
EXPENDITURES 9 6 9
(40,217,053.5 (44,385,982.5 (58,583,785.0
INCOME (DEFICIT) 4) 9) 3)

If we simulate a scenario where the Internal Revenue Allotment doesn’t exist, and the
only revenue which the La Paz municipality could depend on is its own Internally- generated
Revenues from taxes, non- taxes charges, and loans or borrowings, the LGU wouldn’t subsist.
The LGU would be incurring tremendous deficits after sustaining its operations without the
Internal Revenue Allotment.
Figure 6:

INTERNALLY- GE

70,000,000.00

60,000,000.00
Schedule 7:

COMPARATIVE REPORTS OF INCOME AND EXPENDITURES

(INCLUDING INTERNAL REVENUE ALLOTMENT)

2005 2006 2007

51,919,420 57,113,621 57,589,605.
REVENUES (INCLUDING IRA) .45 .05 06
50,101,940 52,019,917 65,416,032.
EXPENDITURES .99 .76 09
1,817,479 5,093,703 (7,826,427.
INCOME (DEFICIT) .46 .29 03)

The municipality of La Paz had actual net income of Php1,817,479.46 for the year 2005,
Php5,093,703.29 for the year 2006 and (Php7,826,427.03) for the year 2007.

Figure 7:

TOTAL REVEN

70,000,000.00

60,000,000.00
It is determinable from the figures appearing in Schedule 6 and Schedule 7, that without
the Internal Revenue Allotment, La Paz municipality wouldn’t subsist.

50,000,000.00

40,000,000.00
Variance Report Analysis

In order to determine that an LGU’s fiscal administration is effective, we may focus on

budget monitoring. Budget monitoring is used to measure how closely an organization is meeting
its objectives in terms of its finances. Comparisons of actual revenues and expenditures against
budgeted or estimated revenues and expenditures need to be done regularly. This is effectively
done through the use of a variance report. Through a variance report, we are able to determine
whether we have underestimated or overestimated revenues to be generated or have underspent
or overspent for certain expenditures on a monthly basis. However, for the purpose of this study,
a variance report is conducted on a yearly basis.

We make reference to attached Schedule 8: Variance Report for this analysis.

Revenues estimated to be generated versus actual revenues generated were overestimated

by almost Php4.3-22.07million from years 2005 to 2007. A sign of deficient budget monitoring
arises when revenues remain uncollected such as Business Taxes and Real Property Taxes. The
increase in Internal Revenue Allotment has balanced the overestimation made in other revenues
of the La Paz municipality because it has been underestimated by about Php4.1-8.72million from
years 2005- 2007. The municipality may not have failed by overestimating rather by failing to
monitor their budget properly, the LGU was not able to correct the deviations from the budget.

Expenditures estimated to be incurred have been overallocated by Php8.39-18.05million.

Accounting conservatism entails that “anticipate no profit, but anticipate all loses”. Because too
much expenditures were anticipated, the actual expenditures incurred were lower and savings
were made. However, the municipality incredibly failed to anticipate the rising costs of
electricity and underallocated funds for general services considering that it comprises a great
percentage of the local sectoral categories. Furthermore, they failed to anticipate in their budget
the increase in payment of Additional Compensation and PAG-IBIG Contributions Expense in
the year 2006 and 2007. The over- all savings on expenditures is indicative of good fiscal
administration; however it merely balances the defects encountered in the estimation of
revenues.

CONCLUSIONS

The Internal Revenue Allotment (IRA) comprises 81-88% of the Total Revenues of La
Paz. Therefore, it consist a huge portion of the Total Revenues. From the percentage share in the
Total Revenues of the IRA, one may from said figure determine that the possibility of
subsistence without the IRA is not possible.

However, the group further looked into the possibility of an effective Fiscal
Administration in the long run to overcome the aforementioned scenario. With the variance
report, we were able to determine that Revenues expected to be generated and collected were not
fully collected and the IRA served as a balancing figure to avoid possible deficits. The fiscal
administrators of La Paz failed to correct the deviations from their budget on a timely basis
because of the lack of budget monitoring. Optimistically, most expenditure was reduced
especially in Repairs and Maintenance. Savings were made to holistically offset the
overestimation made on revenues.

In totality, the fiscal administration in La Paz, should be improved if it is one factor to be

considered on the probability of Fiscal Autonomy without Internal Revenue Allotment.

RECOMMENDATIONS

1. The Municipal Treasurer of La Paz should intensify its collections efforts in order to
meet its target revenues. Amnesty programs should also be considered because two
years have elapsed where there is a large variance between estimated revenues from
Business Taxes and Real Property Taxes and actual collections from Business and
Real Property Taxes. Amnesty programs may help motivate delinquent taxpayers to
pay their past due accounts to result into increased collections for the municipality.

2. Administrative and Legal remedies to collect from the delinquent taxpayers should be
employed.

3. The Municipality of La Paz is generally an agricultural land. Infrastructure projects

should be increased to aid accessibility to basic needs. Agricultural services and
programs must be given priority to help farmers in transporting farm inputs and their
harvested crops.

4. The municipality should think of activities, programs and project that will generate
commercial investment in urban areas of La Paz resulting to more employment
opportunities.