By: PROF. LEONOR MAGTOLIS BRIONES U.P. National College of Public Administration and Governance

1. LOCAL FISCAL ADMINISTRATION AND MANAGEMENT By: PROF. LEONOR MAGTOLIS BRIONES U.P. National College of Public Administration and Governance Lead Convenor, Social Watch Philippines Chair, KAAKBAY “Refresher Course on Participatory Budgeting and MOU Signing for Task Force on Democratic Budgeting” Magpet, North Cotabato Sept. 27, 2012

2. There are two global and national developments which have direct implications on LGUs and LGU officials : 1. Citizens participation in governance, especially in public finance 2. Transparency and accountability in governance 3. For LGUs, this includes DILG’s Memorandum Circular 2010-83 on 14 financial statements

3. Some concepts… Public Finance the inflow and outflow of financial resources to achieve public objectives

4. Concepts… People’s participation • people’s participation in governance is redefined by Buendia as “the expression of citizenship and the collective exercise of power of the organized disadvantaged basic sectors to advance the people’s interests for the greater public good, which is pursued within and and beyond the confines of the public arena.” • “Democratizing Governance in the Philippines: Redefining and Measuring the State of People’s Participation in Governance” (2005)

5. Concepts… Citizens’ participation • “citizens participation” have been broadened to include organized NGOs or civil society organizations, professional groups, academic institutions , church and civic organizations, in addition to the basic sectors. • very often, these groups form networks and pursue advocacies as citizens’ groups.

6. Citizens’ participation and democracy • citizens participation go back to traditional community practices even before the coming of foreign invaders • these traditions were suppressed during the colonial period and marginalized by 18 years of martial law regime • citizens’ participation is explicitly provided for in the 1987 constitution

7. Article XIII of the 1987 ConstitutionROLE AND RIGHTS OF PEOPLE’S ORGANIZATIONS Sec. 15. The State shall respect the role of independent people’s organizations to enable the people to pursue and protect, within the democratic framework, their legitimate and collective interests and aspirations through peaceful and lawful means. People’s organizations are bona fide associations of citizens with demonstrated capacity to promote the public interest and with identified leadership, membership, and structure.

8. Article XIII of the 1987 ConstitutionROLE AND RIGHTS OF PEOPLE’S ORGANIZATIONS Sec. 16. The right of the people and their organizations to effective and reasonable participation at all levels of social, political, and economic decision-making shall not be abridged. The State shall, by law, facilitate the establishment of adequate consultation mechanisms.

9. PUBLIC FINANCE CYCLE • Fiscal Policy • Revenue and Tax Administration • Budgeting and Expenditures • Borrowing • Accountability

10. Scope of Local Public Finance • All aspects of local taxation • Loan and its management • Operation of public enterprise • Revenue enhancement measures • Revenue planning, forecasting & accounting 1. Revenue Generation

11. Scope of Local Public Finance • Synchronized planning and budgeting • system and processes • Accounting and auditing of expenditures 2. Revenue Allocation and Utilization

12. Scope of Local Public Finance • Property and supply management • Internal Control in all fiscal functions • Organization • Computerization of systems related to • public finance Other Aspects

13. Profile and Financial Status of Magpet

14. Profile • Population 45,726 • Total Land Area 75,536 has • No. of barangays 32 • No. of households 9,214 • IRA share 115,146,319 • Local-Sourced Revenues 4,762,790.21 • Total LGU Income 119,909,109.21

15. Local Revenue Collection EfficiencyMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Desired performance: lower than the average of LGUs with the same LGU type and income class Exceptional performance: lower than the average of LGUs with the same LGU type and income class and lower than the national average

16. Local Revenue Collection Effort vis-à-vis Dependency to External Revenue Sources*Municipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 *external revenue sources: IRA and other inter-governmental fund transfers

17. Locally-Sourced Revnue LevelMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Desired performance: higher than the average of LGUs with the same LGU type and income class Exceptional performance: higher than the: (1)average of LGUs with the same LGU type and income class, (2) national average of the same LGU type regardless of income class

18. Locally-sourced Revenue per capitaMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Desired performance: higher than the average of LGUs with the same LGU type and income class Exceptional performance: higher than the average of LGUs with the same LGU type and income class and higher than the national average

19. Local Revenue Collection Effort on RPTMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Desired performance: higher than the average of LGUs with the same LGU type and income class Exceptional performance: higher than the: (1)average of LGUs with the same LGU type and income class, (2) national average of the same LGU type regardless of income class

20. Resource Allocation and UtilizationMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Shows the biases of the LGU in terms of budget allocation . Desired performance: not to exceed with the ceiling as mandated by law, i.e. for 1st-3rd class LGUs – 45%, for 4th-6th class LGUs – 55% Exceptional performance: lower than the average of LGUs with the same LGU type and income class and lower than the national average

21. Total Expenditure per capitaMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Interpretation Guide Desired performance: higher than the average of LGUs with the same LGU type and income class Exceptional performance: higher than the average of LGUs with the same LGU type and income class and higher than the national average

22. Actual Debt Service Costs to Total Regular IncomeMunicipality of Magpet, North CotabatoFiscal Year 2011 Source: Local Governance Performance Management System, Bureau of Local Governance Statistics, DILG, 2012 Note: the debt servicing limitation set for under the 1991 Local Government Code is 20%

23. Observation and Recommendations • Municipal income dependent largely on external revenue sources (IRA, intergovernmental fund transfers) • Improve further revenue collection efficiency • Increase local revenue

24. Observation and Recommendations • Municipal income dependent largely on external revenue sources (IRA, intergovernmental fund transfers) • Improve further revenue collection efficiency • Increase local revenue

25. Fiscal Administration and Budget • THE LOCAL GOVERNMENT CODE OF THE PHILIPPINES (Republic Act No. 7160) SEC. 305. Fundamental Principles. - The financial affairs, transactions, and operations of local government units shall be governed by the following fundamental principles:

26. Fiscal Administration and Budget • SEC. 305. Fundamental Principles of Budget Operations: (a) No money shall be paid out of the local treasury except in pursuance of an appropriations ordinance or law; (b) Local government funds and monies shall be spent solely for public purposes;

27. Fiscal Administration and Budget SEC. 305. Fundamental Principles of Budget Operations: (c) Local revenue is generated only from sources expressly authorized by law or ordinance, and collection thereof shall at all times be acknowledged properly; (d) All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for as local funds, unless otherwise provided by law;

28. Fiscal Administration and Budget • SEC. 305. Fundamental Principles of Budget Operations: (g) Local governments shall formulate sound financial plans, and the local budgets shall be based on functions, activities, and projects, in terms of expected results; development plans, goals, and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources; (i) Local budgets shall operationalize approved local development plans;

29. Fiscal Administration and Budget • SEC. 305. Fundamental Principles of Budget Operations: (l) Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units; and (m) The local government unit shall endeavor to have a balanced budget in each fiscal year of operation.

30. LOCAL OFFICIALS IN FISCAL ADMINISTRATION Functions, Accountabilities and Resources

31. Who are responsible for Local Public Finance? • Local Chief Executive (LCE) • Local Sanggunian • Local Finance Committee (LFC) • Local Development Council (LDC)

32. General Fund (includes the 20% Devt Fund, 5% calamity fund, intel fund Special Funds SEF Trust Fund Can LG Officials Spend as they wish?

33. Mandatory Requirements in the Preparation and Approval of the Annual Budget Total Appropriationsshall not exceed the estimates of income. (LGC, Sec. 324 ) Full Provision shall be made for all contractual and statutory obligations of the LGU. (LGC Sec, 324 ) Debt Servicing shall not exceed 20% of the regular income of the LGU. (LGCSec. 324 ) Aid to Barangays shall not be less than One Thousand Pesos (PhP 1,000.00) per barangay. (LGC Sec. 324 )

34. Mandatory Requirements in the Preparation and Approval of the Annual Budget Calamity Fund shall be 5% of the estimated revenue from regular sources (LGC Sec. 324 [d] & RA 8185) Development Fund shall be at least 20% of the LGU’s Annual Internal Revenue Allotment and shall be appropriated for development projects. (Sec. 287, LGC) Personal Services shall not exceed 45% for 1st to 3rd class LGU, and 55% for 4th to 6th class LGU (LGC Sec. 325[ a])

35. Mandatory Requirements in the Preparation and Approval of the Annual Budget • Discretionary Purposes shall not exceed 2% of the actual receipts derived from basic real property tax ( LGC Sec 325[ h] ) • Intelligence or Confidential Undertakingsshall not exceed 30% of the total annual amount allocated for peace and order efforts or 3% of the annual appropriations, whichever is lower (DILG MC No. 99-65. S. 199, as amended). • Allocation for the strengthening of the Local Council for the protection of children shall be 1% of the Internal Revenue Allotment of the LGU (RA 9344, 2006, Juvenile Justice and Welfare Act)

36. Local Finance is not only the business of LCE, Local Sanggunian, LFC & LDC, it is the business of citizens as well.

37. Participatory Budgeting . . .”a decision-making process through which citizens deliberate and negotiate over the distribution of public resources. Participatory budgeting programs are implemented at the behest of governments, citizens, nongovermental organizations (NGOs) and civil society organizations (CSOs) to allow citizens to play a direct role in deciding how and where resources should be spent. These programs create opportunities for engaging, educating, and empowering citizens, which can foster a more vibrant civil society.”