Public Fiscal Administration

Introduction of Local Fiscal

Administration

Organization of Local Fiscal

Administration

Realities, Policies and Goals of

Public Fiscal Administration
This presentation will discuss:
1) introduction to local fiscal
administration
2) elements and scope
3) legal basis
4) institutional framework and
organization
5) realities, policies and goals of
public fiscal administration in the
Philippines.
Learning Objectives
• Discuss Local Fiscal Administration as
defined by authors.
• Enumerate the elements and scope of
LFA.
• Discuss the Legal Basis of LFA.
• Present the institutional framework,
organization and goals of LFA.
• Briefly discuss the NGAs and institution
with supervisory power over LGUs.
• Briefly discuss the policy of LFA and
• Generate insights on realities of PFA
Local Fiscal Administration involves

-revenue generation

-the rational allocation, utilization and

control of resources

-through the concepts of performance

budgeting by the Local Government Units
(LGU)

-to optimize the use of public funds for the

benefits of the greatest number of people.
Local Fiscal Administration
refers to conduct and
management of financial
affairs and operations of
-provinces
-cities
-municipalities and
-barangays. Ursal (1984:1)
Local Fiscal Administration
refers to the rational, effective and
efficient conduct of the fiscal
functions and operations of local
government units
which embrace the system,
structures, processes and human
resources involved in revenue
generation, revenue allocation
and utilization.
 Scope of Local Fiscal
Administration
1. Revenue Generation
• All aspects of local taxation;
• Borrowing and its management;
• Operation of public enterprises;
• Revenue enhancement measures;
• Revenue Planning, forecasting &
accounting
Source: Celestino, Malvar, Zipagan (1998:6)
 2. Revenue Allocation and
Utilization
• Budgeting system and process,
including the linkage of planning and
budgeting, expenditure planning,
expenditure allocation and expenditure
monitoring;

• Accounting and auditing of

expenditures;
Source: Celestino, Malvar, Zipagan (1998:6)
 3. Other Aspects
• Property and supply management;

• Internal control which cut across all

fiscal functions and;

• Other related matters like central

grant and allotment, organization for LFA
and computerization of fiscal
operations/system
Source: Celestino, Malvar, Zipagan (1998:6)
 PRINCIPLE OF LOCAL AUTONOMY
Section 2 Article X: “The territorial and political
subdivisions shall enjoy local autonomy.”

The principle of local autonomy under the 1987

Constitution simply means “decentralization”;

It does not make the local government

sovereign within the state or an “imperium in
imperio”.

The exercise of local autonomy remains subject

to the power of control by Congress, and the
power of general supervision by the President.
 PRINCIPLE OF LOCAL AUTONOMY
The primary principle of devolution
and decentralization is

– to unburden the national

government of responsibilities of
attending to the basic needs of the
people by shifting the responsibilities
down to the LGUs where such needs
can best be carried out
 PRINCIPLE OF LOCAL AUTONOMY
Some basic services and functions that were
traditionally delivered and performed by the
central government were transferred to the local
government and it was given the power to appoint
the personnel involved in the delivery of these
services.

Local government was also given additional

local taxation powers and allocated a
significant share from the collection of nationally
impose taxes, to be able to maintain and sustain the
delivery of such services.
 POLITICAL SUBDIVISIONS
Section 1 Article X: The territorial and political subdivisions of
the Republic of the Philippines are the provinces, cities,
municipalities, and barangays. There shall be autonomous
regions in Muslim Mindanao and the Cordilleras as
hereinafter provided.

REGIONS - 17
PROVINCES - 81
CITIES - 145
HUC - 33
ICC - 5
CC - 107
MUNICIPALITIES - 1489
BARANGAYS - 42,036
Source (2017 Annual Report of DILG published at their
website on February 6, 2018)
 AUTONOMOUS REGIONS
The regions themselves do not possess
a separate local government, with the
exception of the Autonomous Region in
Muslim Mindanao, which has an elected
regional assembly and governor.

The Cordillera Administrative Region was

originally intended to be autonomous
(Cordillera Autonomous Region), but the
failure of two plebiscites for its establishment
reduced it to a regular administrative region.
 GENERAL SUPERVISION OF THE PRESIDENT
Section 4 Article X provides that the
President of the Philippines shall exercise
general supervision over local
governments.

Provinces with respect to component cities

and municipalities, and cities and
municipalities with respect to component
barangays, shall ensure that the acts of their
component units are within the scope of
their prescribed powers and functions.
 GENERAL SUPERVISION OF THE PRESIDENT
Section 4 Article X provides that the
President of the Philippines shall exercise
general supervision over local
governments.

Provinces with respect to component cities

and municipalities, and cities and
municipalities with respect to component
barangays, shall ensure that the acts of their
component units are within the scope of
their prescribed powers and functions.
 GENERAL SUPERVISION OF THE PRESIDENT
The President can only interfere in the affairs and activities
of a local government unit if he finds that the latter had
acted contrary to law.

This is the scope of the President’s supervisory powers over

local government units. Hence, the President or any of his
alter egos, cannot interfere in the local affairs as long as
the concerned local government unit acts within the
parameters of the law and the Constitution.

Any directive, therefore, by the President or any of his alter

egos seeking to alter the wisdom of a law-conforming
judgement on local affairs of a local government unit is a
patent nullity, because it violates the principles of local
autonomy (Judge Dadole vs. Commission on Audit).
 GENERAL SUPERVISION OF THE PRESIDENT
The power of general supervision by the
President over local governments, as
provided for in the Constitution, is now limited
and extend only to provincial governors and
mayors of HUCs.

General supervision over lower level officials

is entrusted to the provincial governor and to
some extent to the local legislative councils.
The national government has no control over
local governments except for the power of
general supervision.
 GENERAL SUPERVISION OF THE PRESIDENT
The national government cannot abolish a local
government. The legislature can pass a law
abolishing a local government but only after the
law is approved by the people through a
referendum.

Political jurisdictions are governed with full

administrative autonomy. However, the national
government still exerts influence and
regulatory of national government subsidies.
National government under certain
circumstances likewise guarantees loan
application of local governments and regulates
the issuance of local government bonds.
POWER TO CREATE ITS OWN SOURCES OF REVENUE

Section 5 Article X: 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.
 POWER TO CREATE ITS OWN SOURCES OF REVENUE
SEC. 130. Fundamental Principles – the following
fundamental principles shall govern the
exercise of the taxing and other revenue-
raising powers of local government units:

a. Taxation shall be uniform in each local

government unit;

Uniformity signifies geographical uniformity.

A tax is uniform when it operates with the
same force and effect in every place where
the subject is found.
 POWER TO CREATE ITS OWN SOURCES OF REVENUE
Uniformity means:

(1) the standards that are used therefor are

substantial and not arbitrary;

(2) the categorization is germane to achieve the

legislative purpose;

(3) the law applies, all things being equal, to both

present and future conditions; and

(4) the classification applies equally well to all

those belonging to the same class.
 POWER TO CREATE ITS OWN SOURCES OF REVENUE

a. Taxes, fees, charges and other

impositions shall:
1. Be equitable and based as far as
practicable on the taxpayer’s ability to
pay;
 POWER TO CREATE ITS OWN SOURCES OF REVENUE

Uniformity in taxation v. Equality in taxation.

Uniformity in taxation means that persons or
things belonging to the same class shall be
taxed at the same rate.

It is distinguished from equality in taxation in

that the latter requires the tax imposed to
be determined on the basis of the value of
the property. Tan v. del Rosario:
 POWER TO CREATE ITS OWN SOURCES OF REVENUE
2. Be levied and collected only for public
purposes;

3. Not be unjust, excessive, oppressive, or

confiscatory;

4. Not be contrary to law, public policy, national

economic policy, or in restraint of trade;

c. The collection of local taxes, fees, charges and

other impositions shall in no case be let to any
private person;
 POWER TO CREATE ITS OWN SOURCES OF REVENUE
d. The revenue collected pursuant to the
provisions of this Code shall inure solely to the
benefit of, and be subjected to disposition by,
the local government until levying the tax, fee,
charge or other imposition unless otherwise
specifically provided herein; and

e. Each local government unit shall, as far as

practicable, evolve a progressive system of
taxation.
 POWER TO CREATE ITS OWN SOURCES OF REVENUE

Tax system is progressive when the rate

increases as the tax base increases.

Reason for progressive system. The explicit

mention of progressive taxation in the
Constitution reflects the wish of the
Commission that the legislature should use
the power of taxation as an instrument for a
more equitable distribution of wealth.
 POWER TO CREATE ITS OWN SOURCES OF REVENUE
Local Governments are authorized to create and
formulate projects as sources of revenue. As such,
local governments are authorized to issue bonds,
debentures, securities, collateral notes and other
obligations to finance self-liquidating, income-
producing development and livelihood projects.

The Department of Budget and Management has

the power to review appropriation ordinances of
provinces, highly urbanized cities, independent
component cities and the municipalities within the
Metropolitan Manila Area (Section 326).
 JUST SHARE IN NATIONAL TAXES
Section 6 of Article X with provides to wit:

Local government units shall have a just share, as

determined by law, in the national taxes which
shall be automatically released to them.

The Internal Revenue Allotment (IRA) refers to the

shares of LGUs from the national internal revenue
taxes equivalent to 40% of the total annual
revenue collection of the 3rd year preceding the
current fiscal year (Section 284, RA 7160, Article
378(c), IRR of RA 7160)
 JUST SHARE IN NATIONAL TAXES
Section 6 of Article X with provides to wit:

Local government units shall have a just share, as

determined by law, in the national taxes which
shall be automatically released to them.

The Internal Revenue Allotment (IRA) refers to the

shares of LGUs from the national internal revenue
taxes equivalent to 40% of the total annual
revenue collection of the 3rd year preceding the
current fiscal year (Section 284, RA 7160, Article
378(c), IRR of RA 7160)
 JUST SHARE IN NATIONAL TAXES
The allocation of the share of each LGU shall be
released directly, without need of any further
action, to the provincial, city, municipal or
barangay treasurer, as the case may be. The IRA
shall not be subject to any lien or holdback that
may be imposed by the national government for
whatever purpose (Section 286, RA 7160, Article
383 (c), IRR of RA 7160)

Beginning FY 2007, the IRA is not only

automatically released but treated as an
automatic appropriation. -meaning the IRA need
not pass through congressional approval before it
is released to LGUs
 JUST SHARE IN NATIONAL TAXES
The distribution of the Internal
Revenue Allotment to local governments
is as follows:

Political Subdivision Percentage Share

Provinces 23%
Cities 23%
Municipalities 34%
Barangays 20%
 JUST SHARE IN NATIONAL TAXES

The share of each province, city

and municipality is as follows:

By Population 50%
By Land Area 25%
By Equal Sharing 25%
 JUST SHARE IN NATIONAL TAXES

The share of each province, city

and municipality is as follows:

By Population 50%
By Land Area 25%
By Equal Sharing 25%
 The Province
First level of hierarchical structure of
local governments consist of a cluster
of municipalities and component
cities headed by elected governor as
head and chief executive of the
Provincial Government.

Source: Cuaresma & Lago (1996:37)

 The City
Serves as a general purpose government
for the coordination and delivery of basic,
regular and direct services and effective
governance of inhabitants within its
territorial jurisdiction. Can be classified as
Independent Component City, Highly
Urbanized City and Component City

Source: Cuaresma & Lago (1996:41)

1 Timothy 6:10 (NIV)

10 For the love of money is a root

of all kinds of evil. Some people,
eager for money, have
wandered from the faith and
pierced themselves with many
griefs.
Ephesians 2:10 (NIV)

10 Forwe are God’s

handiwork, created in Christ
Jesus to do good works,which
God prepared in advance for
us to do.