LOCAL FISCAL

ADMINISTRATIO
N
Dr. Consuelo J. Estigoy, PhD
FISCAL
ADMINISTRATION
Is the act of managing incoming and
outgoing monetary transactions and budgets
for governments, educational institutions,
non-profit organizations and other public
service entities.

ADMINISTRA
LOCAL FISCAL
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:
 the 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;

ADMINISTRA
LOCAL FISCAL
LOCAL FISCAL
ADMINISTRATION
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. ( Cuaresma
and Ilago)

ADMINISTRA
LOCAL FISCAL
 THIS BROAD DEFINITION COMPREHENDS 5
MAJOR ELEMENTS AS THE SCOPE OF LFA. THESE
ARE:
 Systems;
 Structures;
 Processes;
 Official/personnel; and
 Policy environment governing inter-governmental and inter-local fiscal
relations.
In public administration, local fiscal administration is commonly referred to as the formulation,
implementation, and evaluation of local fiscal policies by local governments.

ADMINISTRA
LOCAL FISCAL
LOCAL GOVERNMENT FINANCES
Fiscal relations between national and local government center on the
following major areas of fiscal administration:
 Allotment of internal revenue shares;
 Shares of local governments in national wealth exploitation;
 Shares of earnings of government agencies or government owned or
controlled corporations engaged in the utilization and development of
national wealth;
 Local government borrowing; and
 Review of local government budgets

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LOCAL FISCAL
ASPECTS OF LOCAL FISCAL
ADMINISTRATION
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; and
2. The fiscal relations among LGUs themselves, which may be referred
to as the inter-local fiscal relations.

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LOCAL FISCAL
SCOPE
The definitions of local fiscal administration enumerated the areas covered.
However, it is helpful to specify once more the scope of the field according to
their functional categories, which fall into the main traditional divisions of:
a.Revenue Generations
 All aspects of local taxation;
 Borrowing and its management;
 Operation of public enterprises;
 Revenue enhancement measures;
 Revenue planning, forecasting and accounting;

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SCOPE
b. 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;

c. Other Aspects
 Property and supply management;
 Internal control which cuts across all fiscal functions; and
 Other related matters, like the central grant and allotment system, organization for
local fiscal administration, and computerization of fiscal operations/systems.

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LEGAL BASIS FOR LOCAL FISCAL
ADMINISTRATION
 Local fiscal administration is characteristically legalistic or statutory. It is governed
by laws and statutes. At the sub-national level, local government exercise the
function of fiscal administration by virtue of the explicit powers and authority vested
in them by:
 the Constitution of the land;
 the Local Government Code of 1991; and
 such other laws from national government agencies exercising supervisory power
over the LGUs. A. 1987 PHILIPPINE CONSTITUTION, section 2, article X “The
territorial & political subdivisional shall enjoy local Autonomy.

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CONSTITUTIONAL PROVISIONS
a. Principle of Local autonomy
 The present Constitution, ratified in 1987, contains more substantial provisions on
local governments with one article (Article X) devoted solely on them. The
provisions reflect the changing political environment characterized by growing
recognition of the importance of local governments.
 One provision reiterates the significance of local autonomy, to wit:
 Section 2 Article X: “The territorial and political subdivisions shall enjoy local
autonomy.”

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CONSTITUTIONAL PROVISIONS
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.
• REGION • MUNICIPALITY
• CITY
• PROVINCE • BARANGAY

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 Table 2. List of Highly Urbanized Cities in the Philippines as of 2021
RANK SCORE LGU PROVINCE REGION
1st 59.3090 Quezon (MM) Metro Manila NCR - National Capital Region

2nd 58.8263 Manila Metro Manila NCR - National Capital Region

3rd 52.8006 Pasay Metro Manila NCR - National Capital Region

4th 52.7380 Davao Davao Del Sur REGION XI (Davao Region)

5th 48.0032 Muntinlupa Metro Manila NCR - National Capital Region

6th 46.7149 Makati Metro Manila NCR - National Capital Region

7th 45.7649 Cagayan De Oro Misamis Oriental REGION X (Northern Mindanao)

8th 42.0990 Valenzuela Metro Manila NCR - National Capital Region

9th 41.4838 Pasig Metro Manila NCR - National Capital Region

10th 40.5160 Cebu Cebu REGION VII (Central Visayas)

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.

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POWER TO CREATE THEIR OWN SOURCES
OF REVENUE
General Supervision of the President

 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.

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 A JUST SHARE IN NATIONAL TAXES
 Since financing is a crucial aspect of the success of decentralization and local

autonomy, the 1987 Constitution goes beyond the mere granting to LGUs the
power to create their own revenue sources by adding 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.

.
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 A JUST SHARE IN NATIONAL TAXES
 Since financing is a crucial aspect of the success of decentralization and local

autonomy, the 1987 Constitution goes beyond the mere granting to LGUs the
power to create their own revenue sources by adding 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.

.
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THE DISTRIBUTION OF THE INTERNAL REVENUE
ALLOTMENT TO LOCAL GOVERNMENTS IS AS
FOLLOWS:
By population 50 %

By land area 25 %
By equal 25 %
sharing
THE SHARE OF EACH PROVINCE, CITY AND
MUNICIPALITY IS AS FOLLOWS:
Political Percentage
subdivision Share
Provinces 23 %
Cities 23 %
Municipalities 34 %
Barangays 20 %
INTERNAL REVENUE ALLOTMENT AND ITS PERCENTAGE SHARE IN
THE NATIONAL BUDGET (CY 2022)
 ELECTIVE OFFICIALS
 The fiscal administration is performed by its elected officials who have 3-year

terms as provided for by Section 8 Article X of the Constitution, to wit:

The term of office of elective local officials, except barangay officials, which shall be
determined by law, shall be three years and no such official shall serve for more
than three consecutive terms. Voluntary renunciation of the office for any length of
time shall not be considered as an interruption in the continuity of his service for the
full term for which he was elected.
ADMINISTRA
LOCAL FISCAL
 THE FOLLOWING IS THE BREAKDOWN OF
ELECTIVE OFFICIALS AND THE MINIMUM AGE
REQUIREMENT:
LGU Official Minimum age
Regional governor 35 years old on election day
Autonomous region Regional vice governor Same as regional governor
  Regional legislative assembly member 21 years old on election day
Governor 23 years old on election day
Provinces Vice governor Same as governor
  Sangguniang Panlalawigan member Same as governor
Mayor Same as governor
Vice mayor Same as governor
Highly urbanized cities
Sangguniang Panlungsod member Same as governor
(Councilor)
Mayor 21 years old on election day
Independent Vice mayor Same as independent component
component and and component city mayor
Sangguniang Panlungsod member
component cities Same as independent component
(Councilor)
and component city mayor

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LOCAL FISCAL
 THE FOLLOWING IS THE BREAKDOWN OF
ELECTIVE OFFICIALS AND THE MINIMUM AGE
LGU
REQUIREMENT:
Official Minimum age
Mayor Same as independent component
and component city mayor
Vice mayor
Same as independent component
Municipalities
and component city mayor
Same as independent component and
Sangguniang Bayan member (Councilor) component city mayor
Barangay captain 18 years old on election day
Barangay kagawad Same as barangay captain
Barangay Sangguniang Kabataan chairperson 15 to 21 years old on election day*
   
 

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LOCAL FISCAL
 THE FOLLOWING IS THE BREAKDOWN OF
ELECTIVE OFFICIALS AND THE MINIMUM AGE
LGU
REQUIREMENT:
Official Minimum age
Mayor Same as independent component
and component city mayor
Vice mayor
Same as independent component
Municipalities
and component city mayor
Same as independent component and
Sangguniang Bayan member (Councilor) component city mayor
Barangay captain 18 years old on election day
Barangay kagawad Same as barangay captain
Barangay Sangguniang Kabataan chairperson 15 to 21 years old on election day*
   
 

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LOCAL GOVERNMENT CODE OF 1991 AND
OTHER LAWS
 Following the mandate of the Constitution, a new Local Government Code (RA

7160) was enacted into law in October 1991 and became effective on January 1,
1992. The Code is considered by many as a landmark legislation that gives teeth
and substance to the constitutional policy on local autonomy and decentralization

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 CREATION OF LOCAL GOVERNMENT
UNITS
 No creation, division, merger, abolition, or substantial alteration of boundaries of

local government units shall take effect unless approved by a majority of the votes
cast in a plebiscite called for the purpose in the political unit or units directly
affected. Said plebiscite shall be conducted by the Commission on Elections
(Comelec) within one hundred twenty (120) days from the date of effectivity of the
law or ordinance effecting such action, unless said law or ordinance fixes another
date.
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The Local Government Code has also set requisites for creating local government units
based on verifiable indicators of viability and projected capacity to provide services. A
summary can be found in the table below:
LGU Area Population Income substantially alter the
boundaries of the LGU
P20 million for the last two
2,000 square (2) consecutive years based on
Province
kilometers
250,000 1991 constant • Congress
prices
P100 million for the last two
100 square (2) consecutive years
City
kilometers
150,000 based on 2000 constant • Congress
prices[9]
P50 million for the last two
100 square (2) consecutive years based on
Highly urbanized City
kilometers
200,000 1991 constant • Congress
prices

• Congress
P2.5 million for the last two (2)
50 square consecutive years
Municipality 25,000
kilometers based on 1991 constant • ARMM Regional
prices Assembly

•• Congress
ARMM Regional Assembly
• Sangguniang
Panlalawigan, with
5,000 (Metro recommendation from the
Manila and concerned Sangguniang
highly-urbanized Bayan(s) required
None cities)
2,000 (rest of the country)

Barangay None

•
Sangguniang Panlungsod
DIVISION, MERGER AND ABOLITION OF
LOCAL GOVERNMENT UNITS
 SEC. 8. Division and Merger.of RA 7160 - Division and merger of existinglocal

government units shall comply with the same requirements herein prescribed for
their creation: Provided, however, That such division shall not reduce the income,
population, or land area of the local government unit or units concerned to less
than the minimum requirements prescribed in this Code

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DIVISION, MERGER AND ABOLITION OF
LOCAL GOVERNMENT UNITS
 SEC. 9. Abolition of Local Government Units. of RA 7160- A local government unit

may be abolished when its income, population, or land area has been irreversibly
reduced to less than the minimum standards prescribed for its creation under Book
III of this Code, as certified by the national agencies mentioned in Section 17
hereof to Congress or to the sanggunian concerned, as the case may be.

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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
1. General Welfare Clause [Sec. 16, RA 7160]:

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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
2. Power to Generate and Apply Resources [Sec. 18, RA 7160]

Example:

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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
3. Reclassification of lands [Section 20, RA 7160
Example:

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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
4. Closure and opening of Roads [Sec. 21, RA 7160]

Example:

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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
5. Corporate Powers [Sec. 22, RA 7160
 a) 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;
 To have and use a corporate seal;
 To acquire and convey real or personal property;


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 POWERS IN PURSUANCE OF LOCAL
FISCAL ADMINISTRATION
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:,

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 MUNICIPAL LIABILITY
Section 24 provides that:
Local government units and their officials are

not exempt from liability for death or injury to

persons or damage to property.

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 OTHER LAWS AND GOVERNMENT
ISSUANCES
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.

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 OTHER LAWS AND GOVERNMENT
ISSUANCES
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

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 OTHER LAWS AND GOVERNMENT
ISSUANCES
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 implements auditing rules and regulations
in local government units.

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 OTHER LAWS AND GOVERNMENT
ISSUANCES
 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.

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 OTHER LAWS AND GOVERNMENT
ISSUANCES
 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.

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 ADMINISTRA
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