Local fiscal administration refers to the systems, structures, processes, officials, and policies governing fiscal relations between national and local governments, and among local governments. It includes revenue generation and allocation, budgeting, borrowing, and the roles of agencies like Congress, the Department of Finance, and Commission on Audit. The Local Government Code of 1991 provides the legal basis for local fiscal administration and grants local governments taxation powers and shares of national revenues.
Local fiscal administration refers to the systems, structures, processes, officials, and policies governing fiscal relations between national and local governments, and among local governments. It includes revenue generation and allocation, budgeting, borrowing, and the roles of agencies like Congress, the Department of Finance, and Commission on Audit. The Local Government Code of 1991 provides the legal basis for local fiscal administration and grants local governments taxation powers and shares of national revenues.
Local fiscal administration refers to the systems, structures, processes, officials, and policies governing fiscal relations between national and local governments, and among local governments. It includes revenue generation and allocation, budgeting, borrowing, and the roles of agencies like Congress, the Department of Finance, and Commission on Audit. The Local Government Code of 1991 provides the legal basis for local fiscal administration and grants local governments taxation powers and shares of national revenues.
Local fiscal administration refers to the systems, structures, processes, officials, and policies governing fiscal relations between national and local governments, and among local governments. It includes revenue generation and allocation, budgeting, borrowing, and the roles of agencies like Congress, the Department of Finance, and Commission on Audit. The Local Government Code of 1991 provides the legal basis for local fiscal administration and grants local governments taxation powers and shares of national revenues.
Definition Local Fiscal Administration refers to systems, structures, processes, officials and personnel, and the policy environment governing intergovernmental, and inter-local fiscal relations, affecting among others:
giving and receipt of allotments and grants from the National Government (NG) to local government units (LGUs);
allotment sharing between LGUs;
sharing of taxing powers between the national government (NG) and
LGUs, and among LGUs; policy on tax rates and structure; revenue and expenditure planning; revenue utilization and expenditure allocation; monitoring and approval budgets, tax ordinances and other fiscal measures; policy on borrowing and borrowing instruments; and appointment and supervision of local fiscal officers. The definition underscores inter-governmental and inter-local fiscal relations that transpire between national and local governments and among the latter.
It also refers to revenue generation and revenue
allocation/utilization as part of the scope of local fiscal administration. Five major elements as the scope of local fiscal administration Systems Structures Processes Official/personnel Policy environment governing inter- governmental and inter-local fiscal relations Fiscal Administration Organizing The Principal Agencies tasked with fiscal functions: Ø Congress ,especially the lower house. Ø Department of Finance Ø Department of Budget and Management Ø Commission on audit Local Government Finances Fiscal relations between national and local government centre on the following major areas of fiscal administration:
1. Allotment of internal revenue shares
2. Shares of local governments in national wealth exploitation 3. Shares of earnings of government agencies or government owned or controlled corporations engaged in the utilization and development of national wealth. 3. Local government borrowing 4. Review of local government budgets. Aspects of local fiscal administration The major aspects of local fiscal administration are the fiscal relations between the national government and local governments, and among the local government units, to wit: 1. The fiscal relations between the national government and its agencies, on the one hand, and the LGUs on the other, which we may call vertical financial relations. This is also referred to in the literature as central-local fiscal relations, with the Internal Revenue Allotments at its core; 2. The fiscal relations among LGUs themselves, which may be referred to as the inter-local fiscal relations. Scope Revenue Generations - All aspects of local taxation - Borrowing and its management - Operation of public enterprises - Revenue enhancement measures - Revenue planning, forecasting and accounting Revenue Allocation and Utilization Budgeting system and process, including t he linkage of planning and budgeting expenditure planning, expenditure allocation and expenditure monitoring; Accounting and auditing of expenditures 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 Other Aspects - Property and supply management , Internal control which cuts across all fiscal functions -Other related matters, like the central grant and allotment system, organization for local fiscal administration, and computerization of fiscal operations/systems. In public administration, local fiscal administration is commonly referred to as the formulation, implementation, and evaluation of local fiscal policies by local governments. Powers in Pursuance of Local Fiscal Administration
1. General Welfare Clause [Sec. 16, RA 7160]:
Every local government unit shall exercise the powers expressly
granted, those necessarily implied there from, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Powers in Pursuance of Local Fiscal Administration
2. Power to Generate and Apply Resources [Sec. 18, RA
7160] Local government units shall have the power and authority to establish an organization that shall be responsible for the efficient and effective implementation of their development plans, program objectives and priorities; to create their own sources of revenue and to levy taxes, fees, and charges which shall accrue exclusively for their use and disposition and which shall be retained by them; to have a just share in national taxes which shall be automatically and directly released to them without need of any further action; Powers in Pursuance of Local Fiscal Administration
3. Reclassification of lands [Section 20, RA 7160]
A city or municipality may, through an ordinance passed by the
sanggunian after conducting public hearings for the purpose, authorize the reclassification of agricultural lands and provide for the manner of their utilization or disposition in the following cases: (1) when the land ceases to be economically feasible and sound for agricultural purposes as determined by the Department of Agriculture or (2) where the land shall have substantially greater economic value for residential, commercial, or industrial purposes, as determined by the sanggunian concerned. Powers in Pursuance of Local Fiscal Administration
4. Closure and opening of Roads [Sec. 21, RA 7160]
A local government unit may, pursuant to an ordinance,
permanently or temporarily close or open any local road, alley, park, or square falling within its jurisdiction: Provided, however,That in case of permanent closure, such ordinance must be approved by at least two-thirds (2/3) of all the members of the sanggunian, and when necessary, an adequate substitute for the public facility that is subject to closure is provided. Powers in Pursuance of Local Fiscal Administration
5. Corporate Powers [Sec. 22, RA 7160]
Every local government unit, as a corporation, shall have the following
powers:
(1) To have continuous succession in its corporate name;
(2)To sue and be sued; (3) To have and use a corporate seal; (4) To acquire and convey real or personal property; Powers in Pursuance of Local Fiscal Administration
6. Authority to negotiate and secure grants [Sec. 22, RA 7160]
Local chief executives may, upon authority of the sanggunian,
negotiate and secure financial grants or donations in kind, in support of the basic services or facilities enumerated under Section 17 hereof, from local and foreign assistance agencies without necessity of securing clearance or approval therefor from any department, agency, or office of the national government or from any higher local government unit: Provided, That projects financed by such grants or assistance with national security implications shall be approved by the national agency concerned. Legal Basis for Local Fiscal Administration
Local revenue generation
Taxation The central grant and allotment system Other special shares of LGU’s from national taxes Republic Act No. 7160 Local Government Code of 1991 (a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self- reliant communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities, and resources. The process of decentralization shall proceed from the National Government to the local government units. Local Revenue
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. Local 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. Taxation 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;
(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable on the taxpayer's ability
to pay;
(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
the restraint of trade;
Taxation (c) The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code
shall inure solely to the benefit of, and be subject to the disposition
by, the local government unit levying the tax, fee, charge or other
(e) Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.
Following political subdivisions which have the power to tax
Province City Municipality Barangay Just Share in National Taxes
Section 6 Article X 1987 Constitution.
Local government units shall have a just share, as determined
by law, in the national taxes which shall be automatically released to
them. Distribution of the Internal Revenue Allotment to Local Government
Political Subdivisions Percentage Share
Provinces 23% Cities 23% Municipalities 34% Barangays 20%
Share of each Province, City and Municipality
By population 50% By land area 25% By equal sharing 25% Each Barangay should at least receive eighty thousand Pesos per
annum. The Local Government Code provides that local
governments shall have an equitable share in the proceeds derived
from the utilization and development of national wealth within their
respective areas and sharing these with the inhabitants by way of
direct benefits (Section 289).
Local governments, in addition to the internal revenue allotment, have a share of 40 per cent of the gross collection derived by the national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, other taxes, fees, or charges, including related surcharges, interests or fines and from its share in any co-production, joint venture or production sharing agreement in the utilization and development of the national wealth within their territorial jurisdictions (Section 290). Other Laws and Government Issues
Local fiscal administration is also governed by
laws and issuances from the national agencies that exercise supervisory power over local government units. Other Laws and Government Issues
Department of Budget and Management (DBM)
The DBM is primarily responsible for disseminating
information on Internal Revenue Allotment (IRA) allocation and the local government’s share from the utilization and development of national wealth. This information is used by local governments in the budget preparation phase. Through its regional offices and the Budget Finance Bureau, the Department releases the share of internal revenue allotment directly to the provinces, cities, municipalities and barangays. Other Laws and Government Issues
Department of Finance (DOF)
The DOF, maintains the Bureau of Local Government Finance(BLGF)
which is the unit primarily involved in local financial administration. The Bureau provides technical assistance and training for local governments on local finance. It administers credit facilities such as the Municipal Development Fund, and prepares guidelines and standards on matters related to taxation, credit financing, and imposition of various fees and charges. It also exercises technical supervision on local assessment and treasury operations, and performs monitoring and evaluation of financial performances. Other Laws and Government Issues
Commission on Audit (COA)
The COA is primarily responsible for the accountability phase
of the local budget process. The Commission maintains the Local Government Audit Office (LGAO), through which it 17 implements auditing rules and regulations in local government units. The Commission also “settles accounts and fixes the liability of accountable officers, as well as determines whether fiscal responsibility has been properly and effectively discharged by the local chief executives. Other Laws and Government Issues
Department of Interior and Local Government (DILG)
The DILG, upon which the supervisory power of the
President is reposed, at times issues guidelines which are fiscal-related.
Office of the President (OP)
The President of the Philippines has general supervisory
power over the local government units, as provided by Section 4 of the 1987 Constitution. As such, the OP still issues from time to time executive or administrative orders that affect local government units.
