LOCAL GOVERNMENT AND REGIONAL ADMINISTRATION

1.DECENTRALIZATION - the transfer of authority from central to local

government.

What is Decentralization?

The term "decentralization" embraces a variety of concepts which must

be carefully analyzed in any particular country before determining if
projects or programs should support reorganization of financial,
administrative, or service delivery systems. Decentralization—the transfer
of authority and responsibility for public functions from the central
government to subordinate or quasi-independent government
organizations and/or the private sector—is a complex multifaceted
concept. Different types of decentralization should be distinguished
because they have different characteristics, policy implications, and
conditions for success.

Types of Decentralization

Types of decentralization include political, administrative, fiscal, and

market decentralization. Drawing distinctions between these various
concepts is useful for highlighting the many dimensions to successful
decentralization and the need for coordination among them.
Nevertheless, there is clearly overlap in defining any of these terms and
the precise definitions are not as important as the need for a
comprehensive approach. Political, administrative, fiscal and market
decentralization can also appear in different forms and combinations
across countries, within countries and even within sectors.

Political Decentralization

Political decentralization aims to give citizens or their elected

representatives more power in public decision-making. It is often
associated with pluralistic politics and representative government, but it
can also support democratization by giving citizens, or their
representatives, more influence in the formulation and implementation of
policies. Advocates of political decentralization assume that decisions
made with greater participation will be better informed and more relevant
to diverse interests in society than those made only by national political
authorities. The concept implies that the selection of representatives from
local electoral jurisdictions allows citizens to know better their political
representatives and allows elected officials to know better the needs and
desires of their constituents.

Political decentralization often requires constitutional or statutory

reforms, the development of pluralistic political parties, the strengthening
of legislatures, creation of local political units, and the encouragement of
effective public interest groups.

Administrative Decentralization

Administrative decentralization seeks to redistribute authority,

responsibility and financial resources for providing public services among
different levels of government. It is the transfer of responsibility for the
planning, financing and management of certain public functions from the
central government and its agencies to field units of government
agencies, subordinate units or levels of government, semi-autonomous
public authorities or corporations, or area-wide, regional or functional
authorities.

The three major forms of administrative decentralization --

deconcentration, delegation, and devolution -- each have different
characteristics.

Deconcentration. Deconcentration--which is often considered to be the

weakest form of decentralization and is used most frequently in unitary
states-- redistributes decision making authority and financial and
management responsibilities among different levels of
the central government. It can merely shift responsibilities from central
government officials in the capital city to those working in regions,
provinces or districts, or it can create strong field administration or local
administrative capacity under the supervision of central government
ministries.

Delegation. Delegation is a more extensive form of decentralization.

Through delegation central governments transfer responsibility for
decision-making and administration of public functions to semi-
autonomous organizations not wholly controlled by the central
government, but ultimately accountable to it. Governments delegate
responsibilities when they create public enterprises or corporations,
housing authorities, transportation authorities, special service districts,
semi-autonomous school districts, regional development corporations, or
special project implementation units. Usually these organizations have a
great deal of discretion in decision-making. They may be exempt from
constraints on regular civil service personnel and may be able to charge
users directly for services.

Devolution. A third type of administrative decentralization is devolution.

When governments devolve functions, they transfer authority for
decision-making, finance, and management to quasi-autonomous units of
local government with corporate status. Devolution usually transfers
responsibilities for services to municipalities that elect their own mayors
and councils, raise their own revenues, and have independent authority
to make investment decisions. In a devolved system, local governments
have clear and legally recognized geographical boundaries over which
they exercise authority and within which they perform public functions. It
is this type of administrative decentralization that underlies most political
decentralization.

Fiscal Decentralization

Financial responsibility is a core component of decentralization. If local

governments and private organizations are to carry out decentralized
functions effectively, they must have an adequate level of revenues –
either raised locally or transferred from the central government– as well
as the authority to make decisions about expenditures. Fiscal
decentralization can take many forms, including a) self-financing or cost
recovery through user charges, b) co-financing or co-production
arrangements through which the users participate in providing services
and infrastructure through monetary or labor contributions; c) expansion
of local revenues through property or sales taxes, or indirect charges; d)
intergovernmental transfers that shift general revenues from taxes
collected by the central government to local governments for general or
specific uses; and e) authorization of municipal borrowing and the
mobilization of either national or local government resources through loan
guarantees. In many developing countries local governments or
administrative units possess the legal authority to impose taxes, but the
tax base is so weak and the dependence on central government subsidies
so ingrained that no attempt is made to exercise that authority.

Economic or Market Decentralization

The most complete forms of decentralization from a government's

perspective are privatization and deregulation because they shift
responsibility for functions from the public to the private sector.
Privatization and deregulation are usually, but not always, accompanied
by economic liberalization and market development policies. They allow
functions that had been primarily or exclusively the responsibility of
government to be carried out by businesses, community groups,
cooperatives, private voluntary associations, and other non-government
organizations.

Privatization. Privatization can range in scope from leaving the provision

of goods and services entirely to the free operation of the market to
"public-private partnerships" in which government and the private sector
cooperate to provide services or infrastructure. Privatization can include:
1) allowing private enterprises to perform functions that had previously
been monopolized by government; 2) contracting out the provision or
management of public services or facilities to commercial enterprises
indeed, there is a wide range of possible ways in which function can be
organized and many examples of within public sector and public-private
institutional forms, particularly in infrastructure; 3) financing public
sector programs through the capital market (with adequate regulation or
measures to prevent situations where the central government bears the
risk for this borrowing) and allowing private organizations to participate;
and 4) transferring responsibility for providing services from the public to
the private sector through the divestiture of state-owned enterprises.

Deregulation. Deregulation reduces the legal constraints on private

participation in service provision or allows competition among private
suppliers for services that in the past had been provided by the
government or by regulated monopolies. In recent years privatization and
deregulation have become more attractive alternatives to governments in
developing countries. Local governments are also privatizing by
contracting out service provision or administration.
2. POWER OF EMINENT DOMAIN
Power of Eminent Domain - Eminent domain is the right or power of a
sovereign state to appropriate private property to particular uses to
promote public welfare. It is an indispensable attribute of sovereignty; a
power grounded in the primary duty of government to serve the
common need and advance the general welfare. Police Power – is the
power of the government to regulate behaviors and enforce order within
its territory, often framed in terms of public welfare, security, health,
and safety. The exercise of police power can be in the form of making
laws, compelling obedience to those laws through physical means with
the aim of removing liberty, legal sanctions, or other forms of coercion
and inducements. Power of Taxation – the power to impose and collect
taxes and charges on individuals, goods, services, and other to support
the operation of the government. Funds provided by taxation have been
used by states and their functional equivalents throughout history to
carry out many functions. Some of these include expenditures on war,
the enforcement of law and public order, protection of property,
economic infrastructure (roads, legal tender, enforcement of contracts,
etc.), public works, social engineering, and the operation of government
itself. Governments also use taxes to fund welfare and public services.
These services can include education systems, health care systems,
pensions for the elderly, unemployment benefits, and public
transportation. Energy, water and waste management systems are also
common public utilities.
3. REGIONAL DEVELOPMENT POLICIES
 Policy makers need both a handy reference guide to the regional
policies of their own and other countries and a broader analysis of
trends in regional policies, based on sound, comparable
information. Regional Policies in OECD Countries responds to this
 need. It is the first systematic, comparative analysis of OECD
countries’ regional policies.
 It begins with an overview of the regional policy today. This is
followed by country profiles covering OECD members. The profiles
share a common conceptual framework, allowing countries to see
how their experiences measure up. The report also contains several
annexes, which provide an outline of regional policies in the EU. The
annexes also cover the key topics of cross-border co-operation and
trends in urban-rural linkages, with a focus on efforts to control
urban sprawl.
 The report will help countries to better understand regional policies and to formulate and
diffuse horizontal policy recommendations. The analysis suggests an important role for
regional policies in shaping sustainable endogenous development, in particular well-
developed governance mechanisms to better respond to the different opportunities and
demands of regions and to improve policy efficiency.
Key policy issues    

The report addresses fundamental regional policy concerns, such as: 

 problem recognition
 the objectives of regional policy
 the legal/institutional framework
 the urban/rural framework
 budget structures

 the governance mechanisms linking national and sub-national

governments as well as sectors
Key findings and future directions    

In order to examine the reality of the paradigm shift of regional policies

and the extent to which the paradigm has been implemented, it is
important to understand the factors behind the rationale of each
country’s regional policy, its governance structure, and what objectives
it sets out to achieve. This publication provides answers to these
questions by presenting a comparison of regional development policies
across OECD member countries. This is the first time the OECD has
undertaken a systematic collection of regional policy data. It will enable
us to measure the degree to which regional policy frameworks have
adopted a competitiveness focus. Of note is the policy shift of European
countries to the new paradigm, which has been supported by the new
orientation of the Lisbon agenda. This systematic review of country
strategies for regional development policy should be regularly updated
and further elaborated.
Furthermore, in the future, a set of policy indicators could be developed
and monitored which could be used in decision-making processes.
Relationships should be analysed, for example coherency between
policy objectives and policy tools. We must ask ourselves: what issues
should be considered when establishing indicator systems and
improving them over time?

FINANCIAL MANAGEMENT IN GOVERNMENT

1. BUDGET PROCESS

THE BUDGET PROCESS & THE PHILIPPINE CONGRESS

Many people, especially students who take higher studies in Public
Administration are unaware of the role of Congress in the budget process.
In this article, three main topics will be covered under the budget process
namely: Budgetary Overview, the Constitutional Provisions and Related
Laws in the Budget Process, and the Budget Process.
I. Budgetary Overview
First, we shall define the national budget which is the government’s
estimate of its income and expenditures. It is what the government plans
to spend for its programs and projects, as well as the sources of funds.
The budget process involves budgeting and the budget. Budgeting refers
to methods and practices of government planning, adopting and
executing financial policies and programs. The budget refers to a plan of
expressing in monetary terms the operating program and means of
financing of a government for a definite period of time. The national
budget is spent for the implementation of various government programs
and projects, the operations of government offices such as the payment
of salaries, construction of buildings.
II. Dimensions of the Budget
The budget possesses various dimensions. It can be classified according
to the following: By Sector, By Cost Structure, By Expense Class and By
Object, By Region, By Type of Appropriation.
A. By Sector
The budget contains various type of expenditures. They are for:
1. Social Services Expenditure;
2. Economic Services Expenditure;
3. Defense Expenditure;
4. General Public Services; and
5. Debt Burden
B. By Cost Structure
1. For General Administration & Support Services or Overhead Expenses
2. As Support to Operations for the facilitative functions and services,
staff and technical support
3. For Operations of regular activities addressing agency mandate
Example: Production of goods, delivery of pubic services, and regulation,
etc.
4. For Projects such as homogenous group of activities that result in the
accomplishment of identifiable output within a designated period, whether
foreign or locally funded
C. By Expense Class & By Object
1. Current Operating Expenditures for personal services, maintenance and
other operative expenses (MOOE)
2. Capital Outlays for investments, loans, livestock and crops, land/land
improvements, buildings/structures, furniture/fixtures
D. By Major Recipient of Government
The major recipients of the budget are:
1. The NGAs (National Government Agencies) – they include all agencies
with the Executive, Legislative and Judicial Branches of government
2. The LGUs (Local Government Units) – funding is released in the form of
IRAs (Internal Revenue Allotments), special shares in national proceeds,
credit thru the MDF (municipal development fund), and premium
subsidies for local insurance
3. The GOCCs (Government Owned and Controlled Corporations) –
funding is though subsidies, equity and net lending
E. By Regional Allocation
The Budget is apportioned for each of the various regions of the country.
F. By Type of Appropriation
The budget is further classified into different types, namely:
1. General Appropriations
2. Supplemental Appropriations
3. Continuing Appropriations
4. Automatic Appropriations
The budget may increase or decrease depending on the government’s
policy of how much it will infuse into the economy. Maturing of a country’s
debt determines the size of the budget.
III. Sources of Funds for the National Budget
A. Revenues
1. Tax Revenues
2. Non-Tax Revenues such as fees to be collected
B. Borrowings
The government borrows to provide for the requirements of capital
projects and to support priority programs and projects. Relying solely on
domestic resources will limit government’s capability to provide the
needed support. Domestic resources is insufficient to finance priority
programs and projects.
C. Obligations Budget vs. Cash Budget
Obligations budget are for expenditures incurred for the year and is to be
paid in said year. This can also be for expenditures incurred for the year
to be paid next year. Aside from this, it is also allocated for interest
payments.
Cash budgets are for expenditures incurred for next year. It can also be
allocated for expenditures in previous years, and is also allocated for
interest payments.

D. National Government Deficit vs. Consolidated Public Sector Deficit

The National Government Deficit is the shortfall or deficiency in revenues
over expenditures due to its operations on a given period, usually one
year. A Consolidated Public Sector Deficit covers the combined deficit of
the National Government, the restructuring accounts of the Commercial
Bank, the major non-financial Government Owned and Controlled
Corporations, the Government Financial Institutions, the Local
Government Units, the social security institutions such as the Government
Service Insurance System & the Social Security System, the Oil Price
Stabilization Fund and the BangkoSentralngPilipinas (Central Bank of the
Philippines).
E. Constitutional Provisions & Major Laws Affecting the Budget/Budget
Process:
1. Philippine Constitution
The Constitutional provisions relative to the budget to wit are:

a. Section 24, Article VI, which states that all appropriations, revenue or
tariff bills increase of the public debt, bills of local application and private
bills shall originate in the House of Representatives, but the Senate may
propose or concur with amendments
b. Section 25 (1), Article VI, states that the [Philippine]Congress may not
increase the appropriations recommended by the President for the
operation of the government as specified in the budget. The form,
content, and manner of preparation of the budget shall be prescribed by
law.
c. Section 25 (2), Article VI states that no provision or enactment shall be
embraced in the General Appropriations Bill unless it relates specifically to
some particular appropriation therein. Any such provision or enactment
shall be limited in its operation to the appropriations to which it relates.
d. Section 25 (4), Article VI: “A special appropriations bill shall specify the
purpose for which it is intended, and shall be supported by funds actually
available as certified by the National Treasurer, or to be raised by a
corresponding revenue proposal therein.”
e. Section 25 (5), Article VI: “No law shall be passed authorizing any
transfer of appropriations, however, the President [of the Philippines], the
President of the [Philippine] Senate, the Speaker of the [Philippine] House
of Representatives, the Chief Justice of the [Philippine] Supreme Court,
and the Heads of Constitutional Commissions may, by law, be authorized
to augment any item in the general appropriations law for their respective
e offices from savings in other items of their respective appropriations.”
f. Section 25 (7), Article VI: “If, by the end of the fiscal year, the
[Philippine] Congress shall have failed to pass the General Appropriations
Bill for the ensuing fiscal year, the General Appropriations Law for the
preceding fiscal year shall be deemed re-enacted and shall remain in force
and effect until the General Appropriations Bill is passed by [the
Philippine] Congress.”
g. Section 22, Article VII: “The President shall submit to the Congress
within thirty (30) days from the opening of every regular session, as the
basis of the General Appropriations Bill, a budget of receipts and
expenditures and sources of financing, including receipts from existing
and proposed revenue measures.
2. Book VI of Executive Order No. 292 series 1987, or the Administrative
Code of 1987 entitled National Government Budgeting
3. Presidential Decree No. 1177, as amended, or the Budget Reform
Decree of 1977, insofar as not superseded by executive Order No. 292
series 1987 or the Administrative Code of 1987
4. Other Applicable Laws
F. The Budget Process
This involves four major steps namely:
1. Budget Preparation
Budget Preparation involves the formulation of estimates of revenues and
expenditures by the Executive Departments and Agencies. In preparing
the annual budget proposal, the said department makes an estimation of
government revenues. It then determines the budget priorities within
available revenues and borrowing limits. Finally, it translates these
approved priorities into expenditures.

The main agency involved is the Development Budget Coordination

Committee (DBCC) composed of the following agencies:

a. The Department of Budget and Management, the agency responsible

for resource allocation and management;
b. The Department of Finance, the agency responsible for resource
generation and debt management;
c. The National Economic and Development Authority, the agency
responsible for overall economic activity;
d. The BangkoSentralngPilipinas (Central Bank of the Philippines), the
agency responsible for monetary measures and policies;
e. The Office of the President of the Philippines, the agency responsible
for the approval and oversight of the budget

In the preparation of the budget, the DBCC approves the parameters,

makes a budget call, conducts budget hearings, makes a budget review
then consolidates the budget. It then validates and confirms the budget,
which is finally approved by the President of the Philippines and his
Cabinet. The President thereby submits the budget to Congress for
approval.

2. Budget Legislation/Authorization
a. Overview
This pertains to the whole range of legislative action on the budget,
leading to the enactment of a General Appropriations Law for the year.
The Philippine House of Representatives first conducts hearings/debates
on the budget.

The House then approves the budget, for submission to the Senate of the
Philippines. Senate hearings and debates are conducted on the budget,
which is finally approved. A Bicameral Conference Committee composed
of representatives of the Philippine House of Representatives and the
Senate is convened. After approval by the Bicameral Conference
Committee, the President enacts the budget which is known as the
General Appropriations Act.

b. The Legislative Budget Process

The main unit of the Philippine House of Representatives involved in the
budget process is the Committee Affairs Department (CAD) composed of
the Standing Committees and Sub-Committees. The CAD’s activities
during budget legislation are:

i.Committee Budget Hearings

Standing Committees (sometimes referred to as the Mother
Committee/Committee Proper) are responsible for conducting budget
hearings. During these hearings, macroeconomic assumptions/plans are
presented during the Committee budget hearings on a department wide
level. All the heads of the Executive Departments are invited to these
hearings.
Sub-Committees are also responsible for conducting these budget
hearings. Budget hearings are conducted by the Sub-Committees on an
agency by agency level. Bureaus and other offices under the various
departments of the national government are invited to these hearings.

ii.Printing of General Appropriations Bill (GAB) on 1st Reading

A National Expenditure Program is formulated, and a copy of the GAB on
1st Reading is printed by the Committee Technical Staff, based on the
National Expenditure Program. The GAB is filed in the plenary session for
1st Reading.

iii. Executive Meeting of the Committee

The Committee meets in executive session to discuss and approve
proposed committee amendments to the GAB. Committee Reports are
prepared and filed to the Bills and Index Division.

iv.Sponsorship and Plenary Deliberations

General principles and macroeconomic assumptions are sponsored and

debated in the plenary session. Deliberations on the budgets of each
department, agency, office, including Government Owned and Controlled
Corporations.

v. Approval on 2nd Reading of the GAB

Turno en contra speeches are delivered on the Floor. The turno en contra
is a legislative tradition allowing opponents of a bill an opportunity to
explain at length their position, in the same manner that a bill’s sponsor
delivers a sponsorship speech. After the Turno en Contra, the Philippine
House Members vote on the approval of the GAB on 2nd Reading.

vi.Amendments, Finalization & Printing of the GAB for 3rd Reading

Inclusion of possible amendments to the GAB for 3rd Reading are
submitted to the Floor. Amendments are approved for inclusion in the
proposed copy of the GAB on 3rd Reading, which is subsequently printed
for deliberation.

vii. Approval of the GAB on 3rd Reading

The GAB is distributed to the Philippine House Members who vote on the
approval of the bill on 3rd Reading. The GAB is then approved on 3rd
Reading.

viii. Transmittal of the 3rd Reading Copy of the GAB to the Philippine
Senate

The GAB, as approved on 3rd Reading, is transmitted to the Senate for

consideration in a similar manner as deliberated upon by the House.

ix.Bicameral (Bicam for short) Conference Committee

The Conferees or representatives from both the Philippine House and

Senate convene as a Conference Committee in order to settle and
reconcile differing provisions of each Chamber’s version of the bill.

x. Approval of the Bicam Report

During this stage of the budget process, the Conference Committee
Report is ratified by each Chamber.

xi. Finalization and Printing of the Enrolled Copy of the GAB

All amendments as approved in the Committee Report is incorporated into

the enrolled copy of the GAB. The enrolled copy is finally printed.

xii. Signing of the Enrolled Copy of the GAB

The enrolled copy of the GAB is forwarded to the President for signing.
Veto powers of the President are exercised in the enactment of the GAB.
The signed appropriations bill is finally enacted into a law which is termed
as the General Appropriations Act.

3. Budget Execution/Implementation

Budget execution covers the allotment of appropriations by the central

budget authority to, and the incurrence of obligations by, the spending
departments and agencies of government. The steps in the execution of
the budget are:
a. Release of the funds by the Department of Budget and Management
(DBM)
b. Implementation of the various programs and activities by the different
government agencies
i.Involves the formulation of allotment and cash programs
ii.An Agency Budget Matrix (ABM) is prepared
iii.The ABM is validated/Confirmed for correctness and accuracy
iv.The General Allotment Release Order (GARO)/Special Allotment Release
Order (SARO)/Notice of Cash Allotment is Released (NCA)
v.Government Programs/Projects/Activities can now be implemented due
to fund release
4. Budget Accountability & Review

This involved the reporting of actual performance against plans or targets,

and it involves the following process:
a. Monitoring of agency budgetary performance
b. Comparison and evaluation of actual performance with the initially-
approved work targets
c. A summary list of checks issued is submitted on a monthly basis
d. Physical & Financial Report of Operations is submitted on a quarterly
basis in the form of a trial balance

2. GOVERNMENT BUDGET
A government budget is an annual financial statement presenting the
government's proposed revenues and spending for a financial year that is
often passed by the legislature, approved by the chief executive or
president and presented by the Finance Minister to the nation.
The budget is also known as the Annual Financial Statement of the
country. This document estimates the anticipated government revenues
and government expenditures for the ensuing (current) financial year.
[1]
 For example, only certain types of revenue may be imposed and
collected. Property tax is frequently the basis for municipal and county
revenues, while sales tax and/or income tax are the basis for state
revenues, and income tax and corporate tax are the basis for national
revenues.

Elements

Budgeted revenues of governments in 2006

The two basic elements of any budget are the revenues and expenses. In
the case of the government, revenues are derived primarily
from taxes. Government expenses include spending on current goods and
services, which economists call government consumption; government
investment expenditures such as infrastructure investment or research
expenditure; and transfer payments like unemployment or retirement
benefits.

Special consideration
Government budgets have economic, political and technical basis. Unlike
a pure economic budget, they are not entirely designed to
allocate scarce resources for the best economic use. They also have a
political basis wherein different interests push and pull in an attempt to
obtain benefits and avoid burdens. The technical element is the forecast
of the likely levels of revenues and expenses.

Classification
A budget can be of 3 types:

 Balanced Budget: When government receipts are equal to the

government expenditure, it is called a balanced budget.
 Deficit Budget: When government expenditure exceeds government
receipts, the budget is said to be deficit. A deficit can be of 3 types,
Revenue, Fiscal and Primary deficit.
 Surplus: When government receipts are more than expenditure.

Need and Importance of a Government Budget

Government Budget is a subject of immense importance for a variety of
reasons

1. Planned approach to Government's activities

2. Integrated Approach to fiscal operations
3. Affecting economic Activities
4. Instrument of Economics policy
5. Index of Government's functioning
6. Public Accountability
7. Allocation of Resources
3. REGISTRIES MAINTAINED BY GOVERNMENT AGENCIES
4. NEW REFORMS OF NEW ADMINISTRATION (PRES. DUTERTE)
5. GRAFT AND CORRUPTION
WHAT IS THE DIFFERENCE BETWEEN GRAFT AND CORRUPTION? The
Philippine's national anticorruption framework and strategy defines
corruption as the use of public office and the betrayal of public trust for
private gain, and graft as the acquisition of gain in dishonest or
questionable manner Essentially, corruption refers to corruption
practices in government while graft refers to corruption in general,
including in the private sector. However, the term corruption is
commonly used to refer to all forms of corrupt and corruptible acts and
practices, both inside and outside of government. Graft is the illegal
gaining of funds, corruption is the improper use of funds.
CORRUPTION
As mentioned above, the vice of corruption includes many possible acts.
According to the Merriam-Webster dictionary, the word means
"impairment of integrity, virtue, or moral principle." The word is a noun
that dates to the 14th century and is related to the notions of decay and
depravity. The denotation also includes secondary definitions that account
for the inducement of wrong in another via bribery, and notes that
corruption is a departure from the original or pure form of a thing or idea.

GRAFT
Graft is defined as a use of public stature to gain illegal benefit. For
instance, a senator who sits on the armed services committee in the U.S.
senate cannot use his knowledge of military contracts to buy stock in a
defense contractor's company. His position gives him unfair advantage
over other investors. It is similar to the notion of insider trading in
business.