Government Accounting System for Local Government Units in the

Philippines:

1. The Foundation: The Local Government Code of 1991 (RA 7160)

This landmark law devolved significant powers and responsibilities to LGUs,

including the management of their own finances. It laid the groundwork for a
more decentralized and accountable system of government accounting.

2. Accrual Accounting: A Key Feature

Recognition of Revenue and Expenses: LGUs are now required to adopt

accrual accounting, recognizing revenue when earned and expenses when
incurred, regardless of cash flow. This provides a more accurate picture of
their financial position and performance.

3. Budgetary Accounting: A Core Principle

Budgetary Control: LGUs operate within an approved annual budget,

ensuring that all expenditures are authorized and accounted for.

- Appropriations: Funds are allocated to specific programs and projects,

promoting transparency and accountability.

- Fund Accounting: Government resources are categorized into different

funds, such as the General Fund, Special Funds, and Trust Funds, to track the
use of resources for specific purposes.

4. Transparency and Accountability:

- Public Disclosure: LGUs are required to publish their financial reports,

promoting transparency and allowing citizens to hold them accountable.

- Auditing: The Commission on Audit (COA) independently audits LGU

accounts to ensure accuracy, compliance, and proper use of public funds.
 5. Other Salient Features:

Performance-Based Budgeting: LGUs are encouraged to link budgetary

allocations to specific outcomes and measure the effectiveness of their
programs.

- Integrated Financial Management System (IFMS): A computerized system

that streamlines LGU accounting processes, improves efficiency, and
enhances data management.

- Emphasis on Internal Control: Strong internal control systems are in place

to prevent fraud, waste, and abuse of public funds.

6. Challenges and Future Directions:

Capacity Building: Training and development programs are needed to equip

LGU personnel with the skills and knowledge required for effective accrual
accounting.

- Technology Adoption: Leveraging technology to improve efficiency,

accuracy, and transparency in LGU accounting.

- Harmonization with National Standards: Ensuring that LGU accounting

practices are aligned with national standards and best practices.

Conclusion:

Government accounting for LGUs in the Philippines is undergoing significant

transformation, aiming to be more transparent, accountable, and aligned
with international standards. Understanding these salient features is crucial
for comprehending how LGUs manage their finances and how public
resources are utilized at the local level.

Overview of Philippine Fiscal Policy

What is Fiscal Policy?

Fiscal policy refers to the government’s use of spending and taxation to

influence the economy. It’s like a powerful tool to steer the economy towards
desired goals, such as:
- Economic Growth: Boosting spending or reducing taxes can stimulate
demand and encourage businesses to invest.

- Price Stability: Controlling inflation through measures like tax increases or

spending cuts.

- Employment: Creating jobs through government spending on infrastructure

or public services.

- Income Inequality: Redistributing wealth through progressive taxation and

targeted social programs.

1. Key Players in Philippine Fiscal Policy:

Department of Finance (DOF): The primary architect and implementer of

fiscal policy.

- Bureau of Internal Revenue (BIR): Responsible for collecting taxes.

- Bureau of Customs (BOC): Manages import and export duties.

- Bureau of Treasury (BTr): Manages government debt and finances.

- Congress: Approves the national budget and legislation related to fiscal

policy.

2. Instruments of Philippine Fiscal Policy:

- Government Spending: The government’s expenditure on goods and

services, infrastructure, subsidies, and social programs.

- Taxation: The government’s collection of revenue through various taxes

like income tax, value-added tax (VAT), and excise taxes.

- Debt Management: Issuing government bonds to finance spending and

managing the national debt.

3. Types of Fiscal Policy:

- Expansionary Fiscal Policy: Used during economic downturns to stimulate

growth. This involves increasing government spending or reducing taxes.
- Contractionary Fiscal Policy: Used during periods of high inflation to cool
down the economy. This involves decreasing government spending or raising
taxes.

4. Recent Trends in Philippine Fiscal Policy:

- Focus on Infrastructure Development: The “Build, Build, Build” program

aims to boost economic growth and create jobs through infrastructure
projects.

- Tax Reform: The Tax Reform for Acceleration and Inclusion (TRAIN) Act
aims to simplify the tax system, broaden the tax base, and generate revenue
for development.

- Debt Management: The government is managing debt levels to ensure

fiscal sustainability.

5. Challenges and Considerations:

- Fiscal Sustainability: Balancing spending with revenue generation to avoid

excessive debt accumulation.

- Inequality: Ensuring that fiscal policies benefit all segments of society and
address income inequality.

- Transparency and Accountability: Maintaining transparency in government

spending and ensuring accountability for fiscal decisions.

6. Reminder:

Understanding Philippine fiscal policy is crucial for comprehending the

government’s role in shaping the economy. Its effectiveness depends on
careful planning, implementation, and continuous evaluation to ensure that it
achieves its intended goals while promoting sustainable and inclusive
growth.

Monetary Policy vs. Fiscal Policy in the Philippines

1.What are Monetary and Fiscal Policies?

Monetary Policy: The central bank’s use of interest rates and money supply
to influence the economy. It's like the "throttle" of the economy, adjusting
the flow of money to achieve desired goals.

- Fiscal Policy: The government’s use of spending and taxation to influence

the economy. It’s like the “steering wheel,” directing the economy towards
specific targets.

1. Key Players:

Monetary Policy: Bangko Sentral ng Pilipinas (BSP), the central bank of the
Philippines.

- Fiscal Policy: Department of Finance (DOF), responsible for government

spending and taxation.

2. Instruments of Monetary Policy:

Interest Rates: The BSP sets policy interest rates, influencing borrowing
costs for businesses and individuals.

- Reserve Requirements: The BSP dictates the amount of reserves banks

must hold, impacting the amount of money available for lending.

- Open Market Operations: The BSP buys or sells government securities to

influence the money supply.

3. Instruments of Fiscal Policy:

- Government Spending: The government’s expenditure on goods and

services, infrastructure, subsidies, and social programs.

- Taxation: The government’s collection of revenue through various taxes

like income tax, value-added tax (VAT), and excise taxes.

- Debt Management: Issuing government bonds to finance spending and

managing the national debt.

4. Similarities and Differences:

 - Similarities: Both policies aim to achieve economic stability, growth, and
price stability.

- Differences: Monetary policy focuses on controlling the money supply and

interest rates, while fiscal policy focuses on government spending and
taxation.

5. Recent Trends in the Philippines:

- Monetary Policy: The BSP has maintained a relatively accommodative

monetary policy in recent years, keeping interest rates low to stimulate
economic growth.

- Fiscal Policy: The government has implemented expansionary fiscal

policies, such as the “Build, Build, Build” program and the TRAIN Act, to
boost infrastructure development and stimulate consumer spending.

6. Coordination and Collaboration:

- Effective Policy Mix: Both monetary and fiscal policies work best when
they are coordinated and complement each other.

- Challenges: Coordination can be challenging, as different agencies and

policymakers may have different priorities.

Summary :

Understanding the interplay between monetary and fiscal policies is crucial

for comprehending how the government manages the Philippine economy.
By carefully coordinating these tools, policymakers aim to achieve a
balanced and sustainable economic environment

Government Budget vs. Spending in the Philippines

1. The National Budget: A Blueprint for Government Spending

 The national budget is the government’s annual financial plan, outlining how
much revenue it expects to collect and how it will allocate those funds to
different programs and projects. It’s like a roadmap for government
spending, guiding the allocation of public resources.

2. Budgetary Process: A Collaborative Effort

- Preparation: The Department of Budget and Management (DBM) prepares

the national budget based on the government’s priorities and economic
forecasts.

- Submission: The President submits the proposed budget to Congress for

approval.

- Legislative Review: Congress scrutinizes the budget, holding hearings and

debates, and making amendments.

- Approval: Congress passes the national budget, which is then signed into
law by the President.

3. Key Components of the National Budget:

- Revenue: The government’s income from taxes, fees, and other sources.

- Expenditure: The government’s spending on goods and services,

infrastructure, subsidies, and social programs.

- Deficit/Surplus: The difference between revenue and expenditure. A deficit

occurs when spending exceeds revenue, while a surplus occurs when
revenue exceeds spending.

4. Government Spending: Implementing the Budget

Once the national budget is approved, government agencies begin

implementing their allocated funds. This involves:

- Procurement: Acquiring goods and services through competitive bidding

processes.
- Disbursement: Paying for goods and services, salaries, and other
expenses.

- Monitoring and Evaluation: Tracking the progress of projects and

programs, and assessing their effectiveness.

5. Challenges and Considerations:

- Fiscal Sustainability: Balancing spending with revenue generation to avoid

excessive debt accumulation.

- Prioritization: Making tough choices about which programs and projects to

fund, given limited resources.

- Transparency and Accountability: Ensuring that spending is transparent

and accountable to the public.

6. Recent Trends:

- “Build, Build, Build” Program: A significant increase in infrastructure

spending to boost economic growth.

- Social Welfare Programs: Increased spending on social safety nets to

address poverty and inequality.

- Debt Management: The government is managing debt levels to ensure

fiscal sustainability.

Summary:

The government budget and spending are crucial aspects of Philippine fiscal
policy. Understanding how the budget is created, approved, and
implemented is essential for comprehending the government’s role in
shaping the economy and delivering public services.