LOCAL FISCAL ADMINISTRATION

I. NATURE AND SCOPE

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:

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;

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)

This broad definition comprehends five major elements as the scope of local fiscal administration. These are:

Systems; Structures;

Processes;

Official/personnel; and

Policy environment governing inter-governmental and inter-local fiscal relations.

The first four elements can be interpreted as comprising the internal environment of local fiscal administration, while the policy environment is part of the larger external environment of local fiscal administration.

The definition likewise underscores inter-governmental and inter-local fiscal relations that transpire between national and local governments and among the latter (e.g. giving and receipt of allotments/grants, sharing of taxing powers between central government and LGUs, among the latter, allotment sharing among LGUs).

All definitions have common areas. All of them refer to revenue generation and revenue allocation/utilization as part of the scope of local fiscal administration.

Local fiscal administration refers to the rational, effective and efficient conduct of the fiscal functions and operations of local government units which embrace the systems, structures, processes and human resources involved in revenue generation, revenue allocation and utilization. In addition, such conduct of fiscal affairs is governed by laws and is affected by the fiscal policy environment, which defines central-local and inter-LGU fiscal relations.

Local Fiscal Administration involves revenue generation, the rational allocation, utilization and control of resources through the concept of performance budgeting by the local government units (LGU) to optimize the use of public funds for the benefit of the greatest number of people. It draws strength and rationality from the Constitutional provision of granting local government the power to create their own sources of revenue through local taxation.

In public administration, local fiscal administration is commonly referred to as the formulation, implementation, and evaluation of local fiscal policies by local governments.

Among others, these fiscal policies set the framework and procedures on local revenue generation that includes property tax administration, revenue ordinance codification as well as the operations of local economic enterprises.

It also deals on the national government allotments, shares and subsidies together with the availment of credit financing through domestic and foreign institutions.

Local Government Finances

Fiscal relations between national and local government centre on the following major areas of fiscal administration:

Allotment of internal revenue shares; Shares of local governments in national wealth exploitation;

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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.

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; and

2. The fiscal relations among LGUs themselves, which may be referred to as the inter-local fiscal relations.

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;

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

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Other related matters, like the central grant and allotment system, organization for local fiscal administration, and computerization of fiscal operations/systems.

II. 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

1. 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.”

The principle of local autonomy under the 1987 Constitution simply means “decentralization”; it does not make the local government sovereign within the state or an “imperium in imperio”. The exercise of local autonomy remains subject to the power of control by Congress, and the power of general supervision by the President.

Political subdivisions

Section 1 Article X: The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities,

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and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as hereinafter provided.

Region - A sub-national administrative unit comprising of several provinces having more or less homogenous characteristics, such as ethnic origin of inhabitants, dialect spoken, agricultural produce, etc.

Province - The largest unit in the political structure of the Philippines. It consists, in varying numbers, of municipalities and, in some cases, of component cities. Its functions and duties in relation to its component cities and municipalities are generally coordinative and supervisory.

City – The city composed of a cluster of municipalities or municipalities and component cities. There are three classes of cities in the Philippines: the highly urbanized, the independent component cities which are independent of the province, and the component cities which are part of the provinces where they are located and subject to their administrative supervision.

Municipality - Is a political corporate body which is endowed with the facilities of a municipal corporation, exercised by and through the municipal government in conformity with law. It is a subsidiary of the province which consists of a number of barangays within its territorial boundaries, one of which is the seat of government found at the town proper (poblacion).

Barangay - The smallest political unit into which cities and municipalities in the Philippines are divided. It is the basic unit of the Philippine political system. It consists of less than 1,000 inhabitants residing within the territorial limit of a city or municipality and administered by a set of elective officials, headed by a barangay chairman (punong barangay).

Did you know that the number of cities has more than doubled in over thirty years?

The number of cities in the country has increased by 76 or by 124.5%, from 61 cities in 1977 to 137 cities as of the fourth quarter of 2009. During this 30-year period, the number of cities in Luzon had an increase of 41 cities, Visayas, up by 19 cities and Mindanao with 16 cities more.

Majority of the cities in the country can be found in Luzon. As the largest island in the country, Luzon has 65 cities or 47%, with 16 cities coming from the National Capital Region (NCR). Visayas has

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39 cities or 29% with Regions VI and VII having 16 cities apiece, while Mindanao has 33 cities. Among the regions in Mindanao, Region X had the highest number of cities in the island at 9.

Table 1. Number of Provinces, Cities and Municipalities by Island Group as of December 2009

REGIONS PROVINCES CITIES MUNICIPALITES BARANGAYS

LUZON 38 65 706 20,489

NCR 0 16 1 1,695

CAR 6 2 75 1,176

I (ILOCOS REGION) 4 9 116 3,265

II (CAGAYAN VALLEY) 5 3 90 2,311

III (CENTRAL LUZON) 7 13 117 3,102

IV-A (CALABARZON) 5 13 129 4,011

IV-B (MIMAROPA) 5 2 71 1,458

V (BICOL REGION) 6 7 107 3,471

   

VISAYAS 16 39 369 11,444

VI (WESTERN VISAYAS) 6 16 117 4,051

VII (CENTRAL VISAYAS) 4 16 116 3,003

VIII (ESTERN VISAYAS) 6 7 136 4,390

   

MINDANAO 27 33 423 10,080

IX (ZAMBOANGA 3 5 67 1,904

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PENINSULA)

X (NORTHERN MINDANAO) 5 9 84 2,022

XI (DAVAO REGION) 4 6 43 1,162

XII (SOCCSKSARGEN) 4 5 45 1,194

ARMM 6 2 117 2,488

XIII (CARAGA) 5 6 67 1,310

TOTAL 81 137 1,498 42,013

Some cities act independently from any province and are self-governing as referred to in the Constitution and in the 1991 Local Government Code of the Philippines:

Section 12 Article X: Cities that are highly urbanized, as determined by law, and component cities whose charters prohibit their voters from voting for provincial elective officials, shall be independent of the province. The voters of component cities within a province, whose charters contain no such prohibition, shall not be deprived of their right to vote for elective provincial officials.

Sec. 451 of the Local Government Code provides that Cities, Classified, which states that, “A city may either be component or highly urbanized: Provided, however, that the criteria established in this Code shall not affect the classification and corporate status of existing cities. Independent component cities are those component cities whose charters prohibit their voters from voting for provincial elective officials. Independent component cities shall be independent of the province”

As of December 22, 2009 there are 137 cities in the Philippines. Thirty-eight cities (38) are independent: thirty-three (33) are classified as "highly urbanized" and five (5) as "independent component;" the rest are component cities of the provinces in which they are geographically located.

Table 2. List of Highly Urbanized Cities in the Philippines as of December 2009

Population AreaPopulation

density

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City Province Region 2007 (km²) (km²)

Caloocan -none- NCR 1,378,856 53.33 25855.17

Las Piñas -none- NCR 532,330 41.54 12814.88

Makati -none- NCR 510,383 21.57 23661.71

Malabon -none- NCR 363,681 15.76 23076.21

Mandaluyong -none- NCR 305,576 11.26 27138.19

Manila -none- NCR 1,660,714 38.55 43079.48

Marikina -none- NCR 424,610 33.97 12499.56

Muntinlupa -none- NCR 452,943 46.70 9698.99

Navotas -none- NCR 245,344 10.77 22780.32

Parañaque -none- NCR 552,660 47.69 11588.59

Pasay -none- NCR 403,064 19.00 21213.89

Pasig -none- NCR 617,301 31.00 19912.94

Quezon City -none- NCR 2,679,450 161.12 16630.15

San Juan -none- NCR 125,338 5.94 21100.67

Taguig -none- NCR 670,309 53.67 12489.45

Valenzuela -none- NCR 568,928 44.58 12761.96

Butuan Agusan del Norte Region 13 298,378 816.62 365.38

Baguio Benguet CAR 301,926 57.51 5249.97

Cebu City Cebu Region 07 798,809 315.00 2535.9

Lapu-Lapu Cebu Region 07 292,530 58.10 5034.94

Mandaue Cebu Region 07 318,575 25.18 12651.91

Davao City Davao del Sur Region 11 1,363,337 2,443.61 557.92

Iloilo City Iloilo Region 06 418,710 70.23 5961.98

Iligan Lanao del Norte Region 10 308,046 813.37 378.73

Tacloban Leyte Region 08 217,199 201.72 1076.74

Cagayan de Oro Misamis Oriental Region 10 553,966 412.80 1341.97

Bacolod Negros Occidental Region 06 499,497 162.67 3070.62

Puerto Princesa Palawan Region 04-B 210,508 2,381.02 88.41

Angeles Pampanga Region 03 314,493 60.27 4745.63

Lucena Quezon Region 04-A 236,390 80.21 2947.14

General Santos South Cotabato Region 12 529,542 492.86 1074.43

Olongapo Zambales Region 03 227,270 185.00 1228.49

Zamboanga City Zamboanga del Sur Region 09 774,407 1,414.70 547.4

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

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the failure of two plebiscites for its establishment reduced it to a regular administrative region.

b. Provisions That Strengthen The Principles Of Local Autonomy

General Supervision of the President

Section 4 Article X provides that the President of the Philippines shall exercise general supervision over local governments. Provinces with respect to component cities and municipalities, and cities and municipalities with respect to component barangays, shall ensure that the acts of their component units are within the scope of their prescribed powers and functions.

The President can only interfere in the affairs and activities of a local government unit if he finds that the latter had acted contrary to law. This is the scope of the President’s supervisory powers over local government units. Hence, the President or any of his alter egos, cannot interfere in the local affairs as long as the concerned local government unit acts within the parameters of the law and the Constitution. Any directive, therefore, by the President or any of his alter egos seeking to alter the wisdom of a law-conforming judgement on local affairs of a local government unit is a patent nullity, because it violates the principles of local autonomy (Judge Dadole vs. Commission on Audit).

The power of general supervision by the President over local governments, as provided for in the Constitution, is now limited and extend only to provincial governors and mayors of HUCs. General supervision over lower level officials is entrusted to the provincial governor and to some extent to the local legislative councils. The national government has no control over local governments except for the power of general supervision. The national government cannot abolish a local government. The legislature can pass a law abolishing a local government but only after the law is approved by the people through a referendum. Political jurisdictions are governed with full administrative autonomy. However, the national government still exerts influence and regulatory of national government subsidies. National government under certain circumstances likewise guarantees loan application of local governments and regulates the issuance of local government bonds.

Power to Create their own sources of revenue

Section 5 Article X: Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees

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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 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. However the power given to local governments in the issuance of bonds and other long-term securities is subject to the rules and regulations of the Central Bank and the Securities and Exchange Commission (Section 299). The Department of Budget and Management has the power to review appropriation ordinances of provinces, highly urbanized cities, independent component cities and the municipalities within the Metropolitan Manila Area (Section 326).

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.

The Local Government Code of 1991 reiterated such provision of the Constitution by providing for the automatic release of the Internal Revenue Allotment (IRA).

In accordance with law, the LGUs’ share in local taxes collected by the Bureau of Internal Revenue three years before or says the 2009 share will be based on the 2006 collection. Of the total local taxes, the LGUs will have 40%, while the national government gets the balance.

The distribution of the Internal Revenue Allotment to local governments is as follows:

Political subdivision Percentage Share

Provinces 23 %

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Cities 23 %

Municipalities 34 %

Barangays 20 %

The share of each province, city and municipality is as follows:

By population    50 %

By land area    25 %

By equal sharing    25 %

The code also mandated each LGU to appropriate in its annual budget no less than 20% of its annual IRA for development projects.

Over the years, the total IRA allocation to all LGUs has grown and is currently less than 20% of the total national budget.

INTERNAL REVENUE ALLOTMENT AND ITS PERCENTAGE SHARE IN THE NATIONAL BUDGET (1992-2006)

YEAR AMOUNT (in billion pesos)

TOTAL BUDGET (in billion

pesos)

PERCENTAGE SHARE

1992 20.30 295.20 6.88

1993 36.12 331.70 10.89

1994 46.13 369.00 12.50

1995 52.04 372.10 13.99

1996 56.59 445.10 12.71

1997 71.04 491.80 14.44

1998 80.99 537.40 15.07

1999 96.78 593.60 16.03

2000 111.77 651.00 17.17

2001 111.77 669.88 16.69

2002 134.42 780.80 17.22

2003 141.00 804.0 17.54

2004 141.00 861.6 16.36

2005 151.60 907.6 16.70

2006 166.0 907.6 18.29

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                           Source: Department of Budget and Management

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). Local governments likewise have a share based on the preceding fiscal year from the proceeds derived from any government agency or government-owned or controlled corporation engaged in the utilization and development of the national wealth based on the following formula whichever will produce a higher share for the local government unit:

1 per cent of the gross sales or receipts of the preceding calendar year; or

40 per cent of the mining taxes, royalties, forestry and fishery charges and such other taxes, fees or charges, including related surcharges, interests, or fines the government agency or government-owned or controlled corporation would have paid if it were not otherwise exempt (Section 291).

c. 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.

The following is the breakdown of elective officials and the minimum age requirement:

LGU Official Minimum age

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Autonomous regionRegional governor 35 years old on election dayRegional vice governor Same as regional governorRegional legislative assembly member 21 years old on election day

ProvincesGovernor 23 years old on election dayVice governor Same as governorSangguniang Panlalawigan member Same as governor

Highly urbanized cities

Mayor Same as governorVice mayor Same as governorSangguniang Panlungsod member (Councilor)

Same as governor

Independent component and component cities

Mayor 21 years old on election day

Vice mayorSame as independent component and component city mayor

Sangguniang Panlungsod member (Councilor)

Same as independent component and component city mayor

MunicipalitiesMayor

Same as independent component and component city mayor

Vice mayorSame as independent component and component city mayor

Sangguniang Bayan member (Councilor)Same as independent component and component city mayor

Barangay

Barangay captain 18 years old on election dayBarangay kagawad Same as barangay captainSangguniang Kabataan chairperson 15 to 21 years old on election day*

Sangguniang Kabataan memberSame as Sangguniang Kabataan chairperson*

*a Sangguniang Kabataan official who has surpassed 21 years of age while in office is allowed to serve for the rest of the term.

B. 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.

Creation of Local Government Units

Section 10 of the Local Government provides that:

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.

As a matter of principle, higher legislative entities have the power to create, divide, merge, abolish, or substantially alter boundaries of any lower-level LGU through a law or by an ordinance, all subject to approval by a majority of the votes cast in a plebiscite to be conducted

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by the Commission on Elections (COMELEC) in the local government unit or units directly affected.

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:

Division and merger,

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: Provided, further, That the

LGU Area Population Income

Legislative bodies that can create, merge, abolish or

substantially alter the boundaries of the LGU

Province2,000 square

kilometers250,000

P20 million for the last two (2) consecutive years

based on 1991 constant prices

Congress

City100 square kilometers

150,000

P100 million for the last two (2) consecutive years based on 2000 constant

prices[9]

Congress

Highly urbanized City

100 square kilometers

200,000

P50 million for the last two (2) consecutive years

based on 1991 constant prices

Congress

Municipality50 square kilometers

25,000

P2.5 million for the last two (2) consecutive years based on 1991 constant

prices

Congress

ARMM Regional Assembly

Barangay None

5,000 (Metro Manila and

highly-urbanized cities)

2,000 (rest of the country)

None

Congress ARMM Regional

Assembly Sangguniang

Panlalawigan, with recommendation from the concerned Sangguniang Bayan(s) required

Sangguniang Panlungsod

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income classification of the original local government unit or units shall not fall below its current income classification prior to such division. The income classification of local government units shall be updated within six (6) months from the effectivity of this Code to reflect the changes in their financial position resulting from the increased revenues as provided herein.

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.  The law or ordinance abolishing a local government unit shall specify the province, city, municipality, or barangay with which thelocal government unit sought to be abolished will be incorporated or merged.

Place illustration/sample

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 therefrom, 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. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance  the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological  capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.

The general welfare clause is the statutory grant of police power to local government units. As such, LGUs may in the exercise of police power under the general welfare clause, order the closure of bank for failure to secure the appropriate mayor’s permit and business licenses (Rural Bank of Makati vs. Municipality of Makati)

It likewise has the authority to issue permits to operate cockpits and for holding of activities for any charitable or welfare purpose.

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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; to have an equitable share in the proceeds from the utilization and development of the national wealth and resources within their respective territorial jurisdictions including sharing the same with the inhabitants by way of direct benefits; to acquire, develop, lease, encumber, alienate, or otherwise dispose of real or personal property held by them in their proprietary capacity and to apply their resources and assets for productive, developmental, or welfare purposes, in the exercise or furtherance of their governmental or proprietary powers and functions and thereby ensure their development into self-reliant communities and active participants in the attainment of national goals.

Place illustration/sample

3. Reclassification of lands [Section 20, RA 7160] - (a) 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: Provided, That such reclassification shall be limited to the following percentage of the total agricultural land area at the time of the passage of the ordinance:

(1) For highly urbanized and independent component cities, fifteen percent (15%);

(2) For component cities and first to third class municipalities, ten percent (10%); and

(3) For fourth to sixth class municipalities, five percent (5%): Provided, further, That agricultural lands distributed to agrarian reform beneficiaries pursuant to Republic Act

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Numbered Sixty-six hundred fifty-seven (R.A. No. 6657), otherwise known as "The Comprehensive Agrarian  Reform Law", shall not be affected by the said reclassification and the conversion of such lands into other purposes shall be governed by Section 65 of said Act.

Place illustration/sample

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.

Place illustration/sample

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; (3) To have and use a corporate seal; (4) To acquire and convey real or personal property;  Place illustration/sample

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: Provided, further, That when such national agency fails to act on the request for approval within thirty (30) days from receipt thereof, the same shall be deemed approved.

Municipal Liability

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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.As such, the local government units is liable in damages for death or injuries suffered by reason of the defective condition of roads, bridges, streets, public buildings and other public works. In fact, in the case of City of Manila vs. Teotico, the city of Manila was held liable for damages when a person feel into an open manhole in the streets of the city.

C. Other Laws and Government Issuances

Local fiscal administration is also governed by laws and issuances from the national agencies that exercise supervisory power over local government units. Such agencies are the following:

a. 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.

b. 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.

c. 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

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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.

d. 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.

e. 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.

III. THE ROLE OF LGUS IN DECENTRALIZED DEVELOPMENT

In 1986, the Aquino government adopted decentralization as the development framework of the national government. To attain more quickly its envisioned developmental goals and objectives, the Government decided to transfer powers, functions and responsibilities from central government to the sub-national level. In 1991 when the Local Government Code was passed by Congress. This piece of legislation altered power relationships between the national government and the local governments. Some basic services and functions that were traditionally delivered and performed by the central government were transferred to the local government and it was given the power to appoint the personnel involved in the delivery of these services. Local government was also given additional local taxation powers and allocated a significant share from the collection of nationally impose taxes, to be able to maintain and sustain the delivery of such services.

Due to these devolved powers and authority, local governments in the Philippines was further given wide latitude to make vital decisions in governing their local communities. They were enabled, and expected to assume new and wider roles in local governance through innovations and changes in the local structures though with limited resources. Most of all they were expected to organize more intervention in local economy to bring about more economic development activities in the community.

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The primary principle of devolution and decentralization is very clear – to unburden the national government of responsibilities of attending to the basic needs of the people by shifting the responsibilities down to the LGUs where such needs can best be carried out,

Local executives now play a more assertive role in their respective units. The Local Government Code gave more leeway for local executives in conceptualizing and in implementing development programs. Unlike before, when significant decisions emanate from the national government, local governments are now given more flexibility in decision making.

Decentralization has never had genuine meaning until the passage of the Code. Despite the presence of strong local leaders throughout the history of the archipelago, the national government has been the dominant factor that determined where development could take place. This was mainly because of its tremendous control of public financial resources.

With the rise in the share of LGUs in the internal revenue allotment (from 11% to a maximum of 40%), proceeds from the utilization of natural resources, as well as other income-enhancing powers, decentralized development may prove to be the real tool in actualizing national development.

Local governments play a significant role in this development task. Advocates of decentralization count on the promptness of public service and accountability to effectively address public needs. The LGUs are the level of government closest to the people; thus, they are in the best position to assess the changing demands of communities and respond to them in such a way that local capacities and priorities are taken into account.

Once local governments are clothed with fiscal autonomy and this autonomy is used effectively and responsibly, development from below would not be impossible to realize. What is left to be done are the following:

the installation of organizational mechanism and policy that anticipate and address the people’s interests in an adequate and accountable manner;

the vigilance of the people themselves in choosing individuals who work in the LGU; and

their support and manifestation of local empowerment.

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Bibliography:

Handbook of Local Fiscal Administration in the Philippines, Alicia B. Celestino, Norberto G. Malvar, Romulo R. Zipagan, Sr., December 1998

The 1987 Constitution, Rex Bookstore 2001 Edition, Philippines

The Local Government Code of 1991, Rex Bookstore 2001 Edition, Philippines

Outline Reviewer in Political Law, Antonio E. B. Nachura, 2009 Edition, Philippines

Wikipedia

Empowering LGUs through Decentralized Development Planning, Volume 11, No. 16 October 2007 of the National Economic Development Authority

Local Fiscal Administration, Jocelyn C. Cuaresma and Simeon A. Ilago

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