LOCAL GOVERNMENT

FINANCE
ANALYSIS AND PROJECTION OF
FINANCIAL RESOURCES
 • What is Development Financing?

OVERVIEW • Local Budget Cycle

• Financial Analysis for LGU Investment Programming

• Income/Revenue Patterns, trends and composition

• Revenue and Expenditure Patterns

• Revenue and Expenditure Projection

DEVELOPMENT
FINANCING
KEY ASPECTS
• Revenue generation

• National Tax Allotment (NTA) previously

known as, IRA (Internal Revenue Allotment)

• Borrowing Capacity

• Special Purpose Funds

• PPP (Public Private Partnership)

• Grants and Subsidies

 DEVELOPMENT
FINANCING
aims to promote inclusive and sustainable growth at the local level, empower

LGUs to address local needs, and contribute to the overall development of the

country. Effective financial management and accountability are crucial to

ensure that resources are used efficiently and effectively for the benefit of the

communities.
 Level of recurring government

operating expenditures

DEVELOPMENT
FINANCING
the number of projects that a

local government unit can

Potential Sources of finance depends on

Revenue level of LGU
Additional Funds and Revenues
 ACCOUNTABILITY BY PREPARATION BY LOCAL
LOCAL SANGGUNIAN AND CHIEF EXECUTIVE
COMMISSION ON AUDIT
LOCAL BUDGET
CYCLE
IMPLEMENTATION BY LEGISLATION BY LOCAL
LOCAL CHIEF EXECUTIVE SANGGUNIAN
LGUS ARE FREE TO CRAFT
THEIR OWN SPENDING PLANS
THE ONLY RESTRICTIONS SET BY THE LOCAL
GOVT CODE ARE:

45-55% CEILING IN BUDGET FOR LGU

PERSONAL SERVICES

AT LEAST 20% OF NATIONAL TAX ALLOTMENT

FOR DEVELOPMENT PROJECTS

 Financial Analysis for
LGU Investment Programming

01 02
ANALYSIS AND PROJECTION OF ANALYSIS AND PROJECTION OF

REVENUES EXPENDITURES
REVENUE PATTERNS
Public revenues are the funds used
not just to keep the government
machinery going but also to enable it
to carry out its fiscal functions of
allocation, distribution, and
stabilization.
 LGU REVENUE STRUCTURE
01 02
LOCAL SOURCES
EXTERNAL SOURCES
• TAX REVENUES (REAL PROPERTY TAX, SPECIAL
• NATIONAL TAX ALLOTMENT (NTA,
LEVIES ON RPT, PROVINCIAL TAXES INC. TAX ON
PREVIOUSLY KNOWN AS IRA OR INTERNAL
PRINTING AND PUBLICATION, BUSINESS TAX,
REVENUE ALLOTMENT)
TAX ON SAND, GRAVEL, AND QUARRYING,
• SHARES FROM SPECIAL LAWS, GRANTS AND
PROFESSIONAL TAX, AMUSEMENT TAX,
AIDS
COMMUNITY TAX
• BORROWINGS/CREDIT FINANCING
• NON-TAX REVENUES (SERVICE FEES AND

CHARGES, PUBLIC UTILITY CHARGES, TOLL FEES

AND CHARGES, RECEIPTS FROM ECONOMIC

ENTERPRISES
 SUMMARY OF REVENUES FROM LOCAL SOURCES (FY 2022)
(in million pesos) 2022 % share of total
Real Property Tax (General Fund) 40,464.14 (40.464 B) 14.5%
Real Property Tax (Special Education Fund) 42,369.69 (42.369 B) 15.2%
Business Tax 107,875.72 (107.875 B) 38.7%
Other Taxes 13,865.06 (13.865 B) 5.0%
Total Tax Revenues 204,574.62 (204.574 B) 73.4%

Regulatory Fees 17,148.05 (17.148 B) 6.3%

Service/User Charges 25,483.96 (25.483 B) 9.1%
Receipts from Economic Enterprises 25,481.15 (25.481 B) 9.1%
Other Receipts (General Income) 5,953.36 (5.953 B) 2.1%
Total Non-Tax Revenues 74,066.52 (74.066 B) 26.6%
TOTAL REVENUES FROM LOCAL SOURCES 278,641.13 (278.641 B) 100%
SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)
5 Provinces, Cities, and Municipalities with Highest Amount of Total Revenue
(in million pesos)
Provinces Amount Cities Amount Municipalities Amount

Ilocos Sur 7,929.63 Manila 26,571.32 Cainta, Rizal 1,548.73

Bulacan 5,994.21 Quezon 23,372.63 Pilar, Abra 1,545.95
Rizal 5,522.70 Makati 18,216.03 Cabugao, Ilocos Sur 1,523.20
Cavite 5,416.79 Taguig 13,828.14 Taytay, Rizal 1,252.33
Cebu 5,118.23 Davao 13,361.39 Rodriguez, Rizal 1,074.49

SOURCE: http://www.coa.gov.ph 2021 Annual Financial Report: Local Government Vol. I

LGUS GET A SHARE OF
NATIONAL TAXES
ASIDE FROM LOCAL SOURCES:
40% LGU SHARE FROM IRA/NTA

ADDITIONAL SHARES ON TOP OF IRA/NTA:

● SHARE FROM GOCC (PAGCOR AND PCSO)

● SHARE FROM ECOZONE

● SHARE FROM EVAT

● SHARE FROM NATIONAL WEALTH

● SHARE FROM TOBACCO EXCISE TAX

 SUMMARY OF REVENUES FROM EXTERNAL SOURCES (FY 2022)
(in million pesos) 2022 % share of total
National Tax Allotment 764,832.59 (764.83 B) 92.9%
Share from Economic Zone (RA 7227) 8,214.15 (8.214 B) 1%
Share from EVAT 69.74M 0.01%
Share from National Wealth 5,033.69 (5.03 B) 0.6%
Share from GOCCs (PAGCOR, PCSO/Lotto) 916.47M 0.1%
Share from Tobacco Excise Tax (RA 7171) 31,048.90 (31.048 B) 3.77%
Other National Tax Collections 165.79M 0.02%

Inter-Local Transfers 7,293.48 (7.293 B) 0.9%

Extraordinary Receipts/Grants/Donations/Aids 5,857.09 (5.857 B) 0.7%
TOTAL REVENUES FROM EXTERNAL SOURCES 823,431.89 (823.43 B) 100%
TOTAL REVENUES FROM LOCAL SOURCES 278,641.13 (278.641 B) 100%

SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)

 WHAT IS IRA?
The internal revenue allotment (IRA) is the main intergovernmental fiscal transfer in the

Philippines. It is the biggest source of operating revenues of local government units (LGUs) to

provide basic goods and services and finance other development activities. Like other

subnational governments in developing countries (Liu and Waibel 2008), LGUs in the

Philippines have been clamoring for more fiscal transfers to address some of the challenges

they have been facing. These include the lack of funds to finance the functions devolved to

them, the unclear delineation of power and authority, and the large disparities in financial

resources among LGUs. The implementation of the Mandanas-Garcia ruling beginning 2022 will

result in LGUs having bigger coffers, however, it also poses varying challenges to both national

and local governments.

 IRA IN 2022
Under Section 284 of Republic Act (RA) No. 7160 or the Local Government Code (LGC) of 1991,

LGUs are entitled to a forty percent (40%) share of the national internal revenue taxes,

otherwise known as the IRA. The manner by which the IRA was determined was challenged in

2013 by then Representatives Hermilando Mandanas and Enrique Garcia Jr., who argued that

the exclusion of certain taxes collected by the Bureau of Customs (BOC) in the IRA computation

caused the diminution of the base for determining the just share of LGUs. Known as the

Mandanas-Garcia ruling, the Supreme Court (SC) held with finality on 10 April 2019 (G.R. Nos.

199802 and 208488) that all collections of national taxes, except those accruing to special

purpose funds and special allotments for the utilization and development of the national

wealth, should be included in the computation of the base of the just share of LGUs.
FROM IRA TO NTA
Following the Mandanas-Garcia ruling, the IRA is

renamed as the national tax allocation (NTA). The

NTA comprises 91 percent of the PhP1.049 trillion

Allocation to LGUs (ALGUS)in the 2022 national

budget. The remaining nine percent (PhP90.37

billion) of the ALGUS is distributed among the

Local Government Support Fund, the Special

Shares of LGUs in the proceeds of National Taxes,

the Bangsamoro Autonomous Region in Muslim

Mindanao, and the Metropolitan Manila

Development Authority, among others.

IRA/NTA is distributed as follows: 23% for
provinces, 23% for cities,
34% for municipalities, and 20% for
barangays. The allocation formula is
population 50%, land area 25%, and equal
sharing 25%.

Distribution of other shares in national

revenues are described in different laws.

SOURCE: Journal of Public Affairs and Development Vol. 4: 109-142 (2017), ISSN
2718-9228:
Decentralization, the Internal Revenue Allotment, and Shared Growth: An Examination
of Correlations
Maquito, Fernando (2017)
ALLOCATION ACROSS LGUs
 IRA/NTA HIGHEST AND LOWEST RECEPIENTS
2022 Provinces Cities Municipalities

Highest Cavite Province Davao City Rodriguez, Rizal

6.57 Billion 8.21 Billion 1.23 Billion
Bulacan Province Quezon City Taytay, Rizal
5.97 Billion 7.94 Billion 1.04 Billion
Cebu Province Manila City Cainta, Rizal
5.83 Billion 4.98 Billion 1.02 Billion
Lowest Siquijor Province Cavite City Ivana, Batanes
864 Million 641 Million 62.9 Million
Camiguin Province Palayan City, Nueva Uyugan, Batanes
833 Million Ecija 62.7 Million
632 Million
Batanes Province Vigan City Mahatao, Batanes
734 Million 546 Million 62.6 Million
SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)
 PUBLIC-PRIVATE
PARTNERSHIP (PPP)
Public-Private Partnerships (PPPs) are
collaborative arrangements between the public
sector (government or public authorities) and the
private sector (businesses or non-profit
organizations) to jointly undertake a project or
provide a service. PPPs are often used to leverage
the strengths and resources of both sectors to
achieve common goals.
 LEGAL BASIS OF PPP
The legal basis for Public-Private Partnerships (PPP) in the Philippines is
primarily derived from the Republic Act No. 6957, as amended by
Republic Act No. 7718, also known as the Build-Operate-Transfer (BOT)
Law. The BOT Law provides the framework for implementing PPP
projects in the country.

Under the BOT Law, PPP refers to contractual agreements between the
government and private entities for the financing, construction,
operation, and maintenance of infrastructure projects or development
of services traditionally provided by the government.
EXPENDITURE PATTERNS
Expenditure patterns in Local Government
Units (LGUs) in the Philippines can vary
depending on several factors such as the
size of the LGU, its economic capacity, and
the specific needs and priorities of the
locality.
EXPENDITURE PATTERNS
Composition of Operating Expenditures:
● General Public Services
● Social Services
○ Education, Culture & Sports/Manpower Development
○ Health, Nutrition & Population Control
○ Labor & Employment
○ Housing and Community Development
○ Social Services and Social Welfare
● Economic Services
● Debt Service (Interest Expense & Other Charges)
 SUMMARY OF EXPENDITURES BY FUNCTION (FY 2022)
2022 Expenditures Provinces Cities Municipalities TOTAL
(In Billion Pesos)
General Public Services 65.23 Billion (45%) 135.2 Billion (50.2%) 163.7 Billion (63%) 364.13 Billion (54%)
Education, Culture, and 3.45 Billion 22.87 Billion 5.03 Billion 31.35 Billion
Sports
Health and Nutrition 35.8 Billion 36.75 Billion 22.7 Billion 95.25 Billion
Labor and Employment 239 Million 747.6 Million 291.7 Million 1.28 Billion
Housing and Community 939 Million 9.8 Billion 2.1 Billion 12.8 Billion
Development
Total Social Services 51.6 Billion (35%) 92.7 Billion (34.5%) 52.9 Billion (20.1%) 197.2 Billion (29.1%)
Economic Services 27.5 Billion (19%) 38.9 Billion (14.5%) 39.2 Billion (16%) 105.6 Billion (16%)
Debt Service 1.85 Billion (1%) 2.2 Billion (0.8%) 2.4 Billion (0.9%) 6.45 Billion (0.9%)

TOTAL CURRENT 146.2 Billion 269 Billion 258.2 Billion 673.4 Billion
OPERATING EXPENDITURES
SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)
 EXPENDITURES ACROSS LGUs
2022 Provinces Cities Municipalities

Highest Bulacan Province Quezon City Taytay, Rizal

5.6 Billion 21 Billion 1.1 Billion
Laguna Province Makati City Rodriguez, Rizal
4.3 Billion 15.1 Billion 1.06 Billion
Quezon Province Manila City Cainta, Rizal
3.9 Billion 13.9 Billion 1.05 Billion
Lowest Southern Leyte Province Palayan City, Nueva Polangui, Albay
500 Million Ecija 35.7 Million
389 Million
Camiguin Province Canlaon City Sigay, Ilocos Sur
483 Million 386 Million 33.4 Million
Batanes Province Maasin City La Castellana, Negros
414 Million 301 Million Occidental
16.9 Million
SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)
LGUS CAN ALSO INCUR DEBT
THE LOCAL GOVERNMENT CODE allows LGUs to
borrow as long as debt servicing does not
exceed 20% of regular income. LGUs are way
below that ceiling.

In fact, LGUs have been very conservative and

have consistently ended with savings at the
end of the year.
 SUMMARY OF EXPENDITURES BY FUNCTION (FY 2022)
2022 Expenditures Provinces Cities Municipalities TOTAL
(In Billion Pesos)
Debt Service - Interest 1.85 Billion 2.2 Billion 2.4 Billion 6.45 Billion
Expense
Debt Service - Loan 5.6 Billion 7.3 Billion 6.5 Billion 19.4 Billion
Amortization
Total Operating Income 271.8 Billion 422 Billion 408 Billion 1.1 Trillion
% Share of Debt Service 3% 2% 2% 2%

2022 Year End Cash Balance 212.5 Billion 294.7 Billion 231.5 Billion 738.7 Billion
SOURCE: http://www.blgf.gov.ph BLGF Statement of Receipts and Expenditures (SRE)
THANK YOU