PHILIPPINE LOCAL GOVERNMENT

I THE LOCAL GOVERMENT SYSTEM

A. The Provincial Government
B. The City Government
C. The Municipal Government
D. The Barangay
II INTERGOVERNMENTAL RELATIONSHIP
A. Concept of Partnership
B. Planning for Development
III LOCAL GOVERNMENT FISCAL STRUCTURE
A. Fund Structure
B. Maor Sources of !evenue
"ocally Generated
Business ta# and other local ta#es
!eal property ta#es
$ncome from economic enterprises
Fees and charges
%#ternally Sourced
Share in B$! gross collection or $!A
Share in the proceeds from the utili&ation and
development of the national 'ealth
"oans
Credits and (onds
Grants or su(sidies
IV LOCAL FISCAL ADMINISTRATION
A. Supervising Authority
B. Fiscal )fficers
V BUDGETING AND FISCAL MANAGEMENT
A. Form and Content
B. "ocal Budgeting Process
I. THE LOCAL GOVERMENT SYSTEM
As defined (y the *nited +ations, a ")CA" G)-%!+M%+T is a political unit of a nation or state constituted (y la' 'ith
po'er of control over local affairs including the po'er to impose ta#es.
$ts functions and scope of activities in relation to the central government are characteri&ed (y.
o Centralism
o /ierarchical structure
o Chain of command
o %#ecutive dominance
o "egislative legislation
The central government has full po'er of control and supervision over all political and administrative units and
su(divisions
A local government unit is regarded as a 0su(ordinate (ranch of the government of the state,1 'hile local government
administration is considered as 0an instrumentality of state administration.1

Provincial Government
$t serves as a dynamic mechanism for developmental processes and effective governance of local government units
under its territorial urisdiction.
M$+$M*M !%2*$!%M%+TS F)! $TS C!%AT$)+.
3. "a' of creation4
5. Approved (y local government units directly affected in a ple(iscite4
6. Average annual income of not less than 57 million4
8. %ither of the follo'ing.
98.3: 5,777 s;. <m. Contiguous area
98.5: 5=7,777 inha(itants
City Government
$s made up of more ur(ani&ed and developed (arangays.
$t serves as a general purpose government for the coordination and delivery of (asic, regular and direct services and
effective governance of the inha(itants 'ithin its urisdiction
BAS$C !%2*$!%M%+TS F)! $TS C!%AT$)+
3. "a' of creation
5. Approval of voters in a ple(iscite
6. Average annual income of 57 million
8. %ither of the follo'ing
98.3: 377 s;. <m. contiguous territory
98.5: 3=7,777 inha(itants
T>P%S )F C$T$%S
3. $ndependent component cities ? 'hich are independent of provinces, have charters that disallo' their voters from
electing provincial officials.
5. /ighly ur(ani&ed cities ? have at least 577,777 inha(itants and annual income of at least P=7 million 93@@3 prices:
Municipal Government
$s composed of (arangays 'hich are less ur(ani&ed and developed than city (arangays.
$t serves primarily as a general purpose government for the coordination and delivery of (asic, regular and direct
services and effective governance of the inha(itants 'ithin its urisdiction
BAS$C !%2*$S$T%S F)! C!%AT$)+
3. Charter of la' creating it4
5. Approval of units directly affected in a ple(iscite4
6. Average annual income of at least 5.= million 93@@3 constant prices:
8. 5=,777 inha(itants
=. =7 s;. <m. contiguous territory
The Barangay
$s the (asic government unit in the political structure
$t serves (oth as 0primary planning and implementing unit of government policies, plans, programs, proects and
activities in the community, and as a forum in 'hich the collective vie's of the people may (e e#pressed, crystalli&ed
and considered, and 'here disputes may (e amica(ly settled.1
M$+$M*M !%2*$!%M%+TS F)! $TS C!%AT$)+
3. "a' or ordinance of Sangguniang Panlala'igan or Sangguniang Panlunsod creating it4
5. Approval (y units directly affected in a ple(iscite
6. A contiguous territory
8. A population of at least 5,777 inha(itants
II. INTERGOVERNMENTAL RELATIONSHIP
+ational and local governments are not on e;ual footing.
"ocal governments o'e their e#istence to congress and they are placed under the general supervision of the President.
More importantly, they only yield po'ers delegated to them (y the national government
Concept of Partnership
)ne o(ective of local autonomy is to ma<e local government units more effective partners of the national government in
attaining national goals.
The C)+C%PT )F PA!T+%!S/$P is (ased on the assumption that in as far as national development is concerned,
neither the national nor local government can 0do it alone.1
$n the process of nationA(uilding, national and local institutions should 'or< in a concrete and unified effort on integrated
programs of local and national concerns.
The partnership scheme, in essence, is sharing of responsi(ilities 'hich may (e operationali&ed (y using the four
dimensions in the administration of any development program 9P"A++$+G, F$+A+C$+G, $MP"%M%+TAT$)+ and
%-A"*AT$)+: as the criteria for determining the specific nature of involvement that may (e assigned to each
government.
o Generally, the planning phase of the program is the primary responsi(ility of the central government 'hich
concerns.
Determination of priorities
Analysis and integration of data inputs from the local units
Systematic allocation of resources
Setting guidelines and policy standards
Actual formulation of the plan
o $n an attempt ho'ever to give importance to local government planning, it is provided that.
The National planning shall be based on local planning to ensure that the needs and aspirations of the people
as articulated by the local government units in their respective local development plans are considered in the
formulation of budgets of national line agencies or offices.
o $n relation 'ith other provisions, it appears that in order that policies, programs and proects proposed (y local
development councils may merit consideration and (e included (y the national government in development
plans, they must first compete to (e integrated 'ith the development plans of the ne#t higher level local
development councils, until they reach the +%DA. $t is only then that they are ta<en into account in the
formulation of the (udget of national line offices.
o Moreover, even those proects and programs underta<en (y local governments alone, as contained in their
respective local (udget plans and goals, have to (e harmoni&ed 'ith national development plans in order to
optimi&e and avoid duplication in utili&ation of government resources. This re;uirement stresses the primacy of
national government in planning.
o The financing phase of most programs may (e a shared responsi(ility through an arrangement 'hich can (e
effected through a num(er of alternatives.
The principal and regular funding of proects may come from the national government (ut fi#ed
contri(utions may (e e#acted from the local units.
$n certain cases, the greater funding re;uirements may (e (orne (y the local units (ut some grants and
su(sidies may re;uire an e;ual sharing (et'een the national and local governments.
All the financial affairs of local governments are audited (y the Commission on Audit of the central
government.
As a rule the local government (udget is revie'ed (y the Sanggunian of the ne#t higher level unit.
/o'ever that of a province, or a highly ur(ani&ed city, or an independent component city, or a Metro
Manila municipality is revie'ed (y the Department of Budget and Management.
Planning for Development
The declared policy that the socioeconomic development of the various regions 'ithin the country 'ill (e promoted (y
underta<ing regional planning at the national level and specific planning and programming at the local level led to the
creation of the regional councils. $ts creation is specially mandated (y the Constitution.
The President shall provide for regional development councils or other similar bodies composed of local government
officials, regional heads of departments and other government offices, and representatives from nongovernmental
organizations within the regions for purposes of administrative decentralization to strengthen the autonomy of the units
therein and to accelerate the economic and social growth and development of the units in the region.
!egional council maintain close coordination 'ith the +ational Government and planning (oards of "ocal Governments
They translate the national economic goals into more specific regional o(ectives 'hich are reflected in plans and
programs of action prepared for the region.
They also coordinate and integrate all planning activities of the local government and local planning (oards in the region
for consideration of the +ational %conomic Development Authority 9+%DA:.

III. LOCAL GOVERNMENT FISCAL STRUCTURE

A. Fund Structure
$s esta(lished under the "ocal Government Code.
%ach local government, including the (arangay, maintains a general fund 'hich comprises moneys and
resources of the local government availa(le for payment of e#penditures, o(ligations or purposes not specifically
declared (y la' as chargea(le to other funds.
Bithin the G%+%!A" F*+D, special accounts are maintained for.
a. Pu(lic utilities and economic enterprise
b. "oans, interests, (ond issues, and contri(ution for specific purposes
c. Development proects funded from $!A and special accounts created (y la' or ordinances
SP%C$A" F*+DS are constituted only (y municipalities, cities and provinces. These are the.
Special %ducation Fund 9S%F: ? consist of shares of all local government units in the proceeds of additional ta# on real
property allocated e#clusively for operation and maintenance of pu(lic schools, construction and repair of school
(uildings, facilities and e;uipment, educational research, purchase of (oo<s and periodicals and sports development.
Trust Funds ? are pu(lic and private moneys 'hich officially come into possession of the local government or of its
official as trustee, or that 'hich are received as guaranty for fulfilment of an o(ligation.
B. Maor Sources of !evenue
"ocal revenues are derived mainly from t'o sources.
1. Allotments and aids from the national governments
2. "ocal ta#es, fees, and charges
"#ternally Sourced
Share in B$! gross collection or $!A
9+AT$)+A" A"")TM%+TS A+D A$DS:
the local governmentCs ust share in national ta#es is constitutionally conferred
the amount is determined (y la' 9"ocal Government Code:
the allotment is ta<en from national internal revenue ta#es 9generally collected (y the B$!: e;uivalent to
87D of collection (ut may (e reduced to 67D in the event the national government incurs an
unmanagea(le pu(lic sector deficit as determined (y the President.
Share in the proceeds from the utili&ation and development of the national 'ealth
9S/A!% $+ +AT$)+A" B%A"T/:
"ocal government are entitled to a 87D share of the governmentCs collection from mining ta#es,
royalties, forestry and fishery charges and other charges on, and coAproduction agreements of, national
'ealth 'ithin their territories.
"oans
Credits and (onds
Grants or su(sidies
cover voluntary contri(utions and aids and given to the government for its operation on specific
purposes
does not re;uire any monetary commitment on the part of the recipient
can (e in the form of money andEor materials
$ocally Generated
Business ta# and other local ta#es
"icense and (usiness ta#es ? include privilege ta#es, fi#ed percentage and similar ta#es on
(re'ers, or on occupation, practice of profession, etc.
Franchise ta#es ? imposed for any special right or privilege granted (y a government, e.g.,
the right to sell a product
%state and gift ta#es ? ta# on the privilege of the decedent to transmit property at death,
and is (ased on the entire net estate regardless of the num(er of heirs in relation to the
descendants.
!eal property ta#es
o $s imposed (y the local government on every land, (uilding, machinery and other real
property located 'ithin its territorial urisdiction.
o !eal property are categori&ed into.
!esidential
Agricultural
Commercial
$ndustrial
Mineral
Tim(erland or special
$ncome from economic enterprise
o $mport duties ? cover all ta#es on foreign goods levied in accordance 'ith tariff la's and
regulations e#cept 'harfage fees
o $mport ta# ? levied on imported materials to control their entry into the local mar<et
o %#cise ta#es ? covering imports and e#ports such as specific trade and compensating ta#es
on alcohol, sugar, playing cards, etc.4
o "icence fees on e#ported goods e#cept 'harfage ta#es and ta#es on goods manufactured,
produced or assem(led in the Philippines4
o Ta#es on the sale of foreign e#change4
o Mining ta#es
o Ta#es on agricultural products e#cept charges on forest products
Fees and charges
o Community ta#A a poll ta# charged from individuals, partnerships and corporations residing
in the Philippines
o Fees and charges ? lguCs are authori&ed to impose reasona(le fees and charges to
commensurate to the cost of inspection and regulation incurred (y the unit in the course of
performing its function
o They may prescri(e the terms and conditions and the rates of toll fees or charges for the
use of any pu(lic road, (ridges, 'harf, or any facility funded and constructed (y them
IV. LOCAL FISCAL ADMINISTRATION
CA!D%&A$ !'$"S (! P!%&C%P$"S P"!TA%&%&G T( $(CA$ F%SCA$ ADM%&%ST!AT%(&
a. +o money shall (e paid out of the local treasury e#cept in pursuance of an appropriation, ordinance or la'4
b. "ocal government funds and monies shall (e spent solely for pu(lic purposes4
c. "ocal revenue is generated only from sources e#pressly authori&ed (y la' or ordinance, and collection thereof shall at
all times (e ac<no'ledge properly4
d. All monies officially received (y a local government officer in any capacity or in any occasion shall (e accounted for as
local funds, unless other'ise provided (y la'4
e. Trust funds in the local treasury shall not (e paid out of the treasury e#cept in the fulfilment of the purpose for 'hich the
trust 'as created or the funds received4
f. %very officer of the local government unit 'hose duties permit or re;uire the possession or custody of local funds shall
(e properly (onded, and such officer shall (e accounta(le and responsi(le for said funds and for the safe<eeping
thereof in conformity 'ith the provisions of la'4
g. "ocal governments shall formulate sound financial plans, and the local (udgets shall (e (ased on functions, activities,
and proects, in terms of e#pected results4
h. "ocal (udget plans and goals shall, as far as practica(le, (e harmoni&ed 'ith national development plans, goals, and
strategies in goals and order to optimi&e the utili&ation of resources and to avoid duplication in the use of fiscal and
physical resources4
. "ocal (udgets shall operationali&ed approved local development plans4
!. "ocal government units shall ensure that their respective (udgets incorporate the re;uirements of their component units
and provide for e;uita(le allocation of resources among these component units4
". +ational planning shall (e (ased on local planning to ensure that the needs and aspirations of the people as articulated
(y the local government units in their respective local development plans are considered in the formulation of (udgets of
national line agencies or offices4
#. Fiscal responsi(ility shall (e shared (y all those e#ercising authority over the financial affairs, transactions, and
operations of the local government units4 and
$. The local government unit shall endeavour to have a (alanced (udget in each fiscal year of operation.
A. S%&e'()*g A%+h,'+-
*nder the Administrative Code of 3@FG, the Department of Finance is responsi(le for the supervision of the
revenue operations of all local government units, 'ith the o(ective of ma<ing these less dependent on funding
from the national government. 9a thrust in concurrence 'ith the government policy of strengthening local
autonomy:
The department ensure implementation of necessary policies and measures on local revenue administration
*nder the "ocal Government Code of 3@@3, the mayor and the governor e#ercise administrative supervision
over their respective local government treasurers.
"ocal treasurers report regularly to the mayor or governors on local collection efforts.
B. F)ca# Offce')
*nder e#isting legislation, ;ualifications and functions of local fiscal officers are made uniform.
). Treasurer
o The position is mandatory for provincial, city, and municipal governments
o Appointed (y the Secretary of Finance from among three or more recommendees of the local chief
e#ecutive.
o !eports ta# collection efforts to the local chief e#ecutive 'ho e#ercises administrative supervision
over him
)T/%! P)B%!S A+D F*+CT$)+S.
a. Advises the local chief e#ecutive, the Sanggunian and other local government and national officials
regarding disposition of local government funds and matters relative to pu(lic finance4
(. Ta<es custody of, and e#ercise supervision over, local government funds4
c. Ta<es charge in dis(ursing local government funds and funds entrusted to him (y la' or competent
authority4
d. $nspects private commercial and industrial esta(lishments 'ithin the urisdiction of the local government
unit concerned in relation to the implementation of ta# ordinances, pursuant to Boo< $$ of the "GC4
e. Maintains and updates ta# information system of the local government unit4
f. %#ercises administrative supervision, in case of the provincial treasurer, over all treasury offices of
component cities and municipalities4 and,
g. %#ercises other po'ers and performs other duties and functions as prescri(ed (y la' or ordinance
*. Assistant Treasurer
o Assist the treasurer and performs duties assigned to him (y the treasurer
o /e is authori&ed to administer oaths concerning notices and notifications to delin;uent real property
ta#payers and official matters relating to accounts of the treasurer or matters arising in the offices of
the treasurer and the assessor.
o Appointed (y Secretary of Finance
o Position is optional for province, city, and municipality
+. Assessor
o Mandatory for provincial, city, and municipal governments
)T/%! P)B%!S A+D F*+CT$)+S.
a. %nsures proper e#ecution of la's and policies governing appraisal and assessment of real property for ta#
purposes4
(. $nitiates, revie's, and recommends changes in policies and o(ectives, plans and programs, techni;ues,
procedures and practices in valuation and assessment of real property for ta# purposes4
c. %sta(lishes a systematic method of real property assessment4
d. $nstalls and maintains a real property identification and accounting system4
e. Prepares, installs and maintains a system of ta# mapping, sho'ing graphically all property su(ect to
assessment and gathers data concerning the same4
f. Conducts fre;uent physical surveys to verify and determine 'hether real property 'ithin the locality are
properly listed in assessment rolls4
g. %#ercises functions of appraisal and assessment primarily for real property ta# purposes in the local
government unit4
h. Prepares a schedule of fair mar<et value for different classes of real property pursuant to Boo< $$ of the
"GC4
i. $ssues certified copies of assessment records of real property and all other records relative to its
assessment upon re;uest of interested party and payment of a service charge or fee to the provincial
treasurer4
. Su(mits a semestral report of assessments as 'ell as cancellations and modifications of assessments to
the local chief e#ecutive and the sanggunian4
<. Attends, in case of assessor of component city or municipality, sessions of the local (oard of assessment
appeals and presents information or record in his possession 'hen re;uired (y the (oard4
l. %#ercises technical supervision and visitorial functions, in case of provincial assessor, over component city
and municipal assessors, and coordinates 'ith them in the conduct of ta# mapping operations and other
assessment activities providing all forms of assistance thereof. /o'ever, said functions are delegated to the
city or municipal assessor 'hen a component city or municipality provides in full the minimum personnel,
e;uipment and funding re;uirements prescri(ed (y the Secretary of Finance4 and,
m. %#ercise other po'ers and performs other duties and functions prescri(ed (y la' or ordinance4

,. Assistant Assessor
o Assists the assessor and perform functions delegated to him (y the later.
o /e is authori&ed to administer oaths on all declarations of real property assessment purposes only
o /is appointment is optional for province, city and municipality
-. Accountant
o The position is mandatory for province, city and municipality
o Ta<es charge of accounting and internal audit services of the local government unit.
)T/%! P)B%!S A+D F*+CT$)+S
a. $nstalls and maintains an internal audit system in the local government unit4
(. Prepares and su(mit financial statements to the local chief e#ecutive and the sanggunian4
c. Apprises the sanggunian and other local government officials on the financial condition and operations of
the local government unit4
d. Certifies the availa(ility of (udgetary allotment to 'hich e#penditures and o(ligations are charged4
e. !evie's supporting documents (efore preparation of vouchers to determine completeness of
re;uirements4
f. Prepares statements of cash advances, li;uidation, salaries, allo'ances, reim(ursements and remittances
pertaining to the local government unit4
g. Prepares statements of ournal vouchers and li;uidation of the same and other adustments related thereto4
h. Posts individual dis(ursements on the su(sidiary ledger and inde# cards4
i. Maintains individual ledgers for officials and employees of the local government unit pertaining to payrolls
and deductions4
. !ecords and posts in inde# cards details of purchased furniture, fi#tures, and e;uipment, including disposal
thereof, if any4
<. Accounts for all issued re;uests for o(ligations and maintains and <eeps all records and reports related
thereto4
l. Prepares ournals and the analysis of o(ligations and maintains and <eeps all records and reports related
thereto4 and,
m. %#ercise other po'ers and performs other duties and functions provided (y la' or ordinance
.. Budget (fficer
o Mandatory position for each province, city and municipality
)T/%! P)B%!S A+D F*+CT$)+S
a. Prepares forms, orders and circulars em(odying instructions on (udgetary and appropriation matters for the
signature of the local government e#ecutive4
(. !evie's and consolidates (udget proposals of different departments and offices of the local government
unit4
c. Assists the local government e#ecutive in (udget preparation and in (udget hearing4
d. Studies and evaluates (udgetary implications of proposed legislation and su(mits comments and
recommendations thereon4
e. Su(mits periodic (udgetary reports to the Department of Budget and Management4
f. Coordinates 'ith the treasurer, accountant and planning and development coordinator for purposes of local
government (udgeting4
g. Assists the sanggunian in revie'ing approved (udgets of component local government units4
h. Coordinates 'ith the planning and development coordinator in formulating local development plan4 and
i. %#ercises other po'ers and performs other duties and functions prescri(ed (y la' or ordinance
/. Planning and Development Coordinator
o Position is mandatory in each province, city and municipality
o !esponsi(le for the planning and development
)T/%! P)B%!S A+D F*+CT$)+S
a. Formulate integrated economic, social, physical, and other development plans and policies for consideration
of the local government development council4
(. Conducts continuing studies, researches, and training programs necessary to evolve plans and programs
for implementation4
c. $ntegrates and coordinates all sectoral plans and studies underta<en (y different functional groups or
agencies4
d. Monitors and evaluates implementation of different development programs, proects and activities in the
local government unit in accordance 'ith the approved development plan4
e. Prepares comprehensive plans and other development planning documents for consideration of the local
development council4
f. Analy&es income and e#penditures patterns, and formulates and recommends fiscal plans and policies for
consideration of the finance committee of the local government unit pursuant to Title =, Boo< $$, of the "GC4
g. Promotes people participation in development planning 'ithin the local government unit4
h. %#ercises supervision and control over the local development council secretariat4 and
i. %#ercises other po'ers and perform other duties and functions prescri(ed (y la' or ordinance.
0. $ocal Finance Committee
o A must for every province, city, and municipality
o Composed of the local planning and development officer, local (udget officer and treasurer
)T/%! P)B%!S A+D F*+CT$)+S
a. Determines proected income for the follo'ing year4
(. !ecommends revenue measures or (orro'ings4
c. !ecommends e#penditure levels and spending ceilings to the local chief e#ecutive4
d. !ecommends proper allocation of e#penditures (et'een current operating e#penditures and capital outlays4
e. !ecommends amount allocation for capital outlay4
f. Assists Sanggunian in revie' and evaluation of (udgets of component local units4
g. Assists Sanggunian in analysis and revie' of o'n (udget4 and
h. Conducts semiAannual revie' and e#amination of cost and accomplishments vs. Performance standards.
V. BUDGETING AND FISCAL MANAGEMENT
A. Form and Content
The local government (udget is primarily composed of estimates of income and total appropriation covering
current operating e#penditures and capital outlay.
The (udget document contains three maor elements.
3. Budget message of the local chief e#ecutive setting forth the significance of the (udget in relation to the local
development plan4
5. Summary of functions, proects and activities to (e accomplished4 and
6. A set of financial statements indicating.
a. Actual income and e#penditures of preceding year4
(. Actual income and e#penditures of first t'o ;uarters and estimates of the last t'o ;uarters4
c. %stimates of income for succeeding year4
d. %stimated e#penditures for succeeding year4
e. %ssential facts regarding the local governmentCs o(ligations and inde(tedness4
f. Summary of statutory and contractual o(ligations4 and
g. )ther data disclosing the financial conditions of the local government unit
B. $ocal Budgeting Process
a. Budget Preparation
(. Budget "egislation
c. %ffectivity
d. Budget %#ecution
e. Supplemental Budget
f. !eversions of *ne#pected Balance
g. Continuing Appropriations
h. Budgetary !e;uirements
i. Budget "imitations
. Budget !evie'
<. Barangay Budget