FINANCIAL MANAGEMENT AREAS PRACTICES

/ APPLIED
-

IRREGULARLY
APPLIED
- NOT PPLIED

1. Functionality of the LFC (All functional areas)

o Compliance with Section 316 of the Local Government Code of 1991. The members
of the LFC are in full compliance with their legal mandate was the main objective of
that body. Generally, they believe that the law limits the LFC from functioning beyond
its provisions, thus compliance with the eight key functions specified by the Code was
the primary concern.
o Regular meetings. LGU indicates that it maintains regular meeting schedules to
periodically review financial issues of the LGU. This allows them to constantly monitor
the financial condition of the LGU and anticipate issues and problems rather than to
schedule meetings only on an ad hoc basis depending on whether there are financial
issues that need to be addressed.
o Expanded membership. The membership of the body was expanded to include other
LGU officials who are stakeholders in the financial management of the LGU. The
expanded membership of the LFC provides the body with better information to make
decisions and improves coordination and cooperation with these other important
stakeholders in LFM.
2. Generation of Revenue from Traditional Sources (Treasury functional area)
o Utilizing all traditional revenue sources. LGU indicates that it exhibites relatively
strong performance in revenue mobilization as evidenced by high rates of Local
Revenues per Capita and low IRA Dependency Ratios compared to their peers in the
sample group. All of the LGUs in the shortlist indicated that they utilize all the traditional
sources of revenue provided for their type of LGU under the Code, with a focus on the
two major sources of revenues: real property taxes and business taxes.
o Computerized tax-mapping. LGU indicates that it implements Geographical
Information Systems or other systems to facilitate tax mapping for real property and
business taxes. This tool been hugely beneficial to the revenue generation of the LGUs
in terms of maintaining an up-to-date and accurate database of taxpayers, assessing tax
levies, and identifying delinquent taxpayers.
o Information and education campaigns. LGU indicates that it utilizes a variety of tax
information campaigns to inform and educate their constituents on their responsibilities
to remit taxes and to explain the purpose and use of the revenues collected by the LGU.
Innovative examples include:
Regular meetings with owners of local businesses before business tax deadlines to
remind them of their responsibilities to pay taxes on time.
Tax caravans that go around the different Barangays of the LGU to disseminate
information and collect taxes on the spot.
Recognition and awards for top local tax payers, e.g. annual dinner sponsored by
LGU.
Dissemination of information to teachers through the Department of Education.

Example:
Oratorical contest for students sponsored by LGU to espouse to the youth the
importance of paying taxes on time and in full.
o Real property tax practices. LGU indicates that it utilizes various initiatives to
improve their collection of real property taxes. These include:
High-value delinquency cases are targeted and judicial remedies are aggressive
implemented to resolve delinquencies. One of the effective remedies utilized is the
public auction of delinquent real properties so that revenues are generated from taxforeclosed properties.
Reassessment of the value of real property every three years. Even though this is
specified in the Code, very few LGUs actually do this. The periodic reassessment
ensures that real property values are accurate and up-to-date, allowing the LGU to grow
its property tax base.
Barangays are deputized by the LGU to disseminate information and collect real
property taxes.
o Business tax practices. LGU indicates that it utilizes various initiatives to improve
their collection of business taxes. These include:
Judicial remedies are aggressive implemented to resolve delinquencies.
An increase of at least 20 percent in gross receipts reported by a business
automatically exempts the business from examination of gross receipts.
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 A decrease in gross receipts reported by a business triggers an automatic examination

of gross receipts.
A sampling of businesses is periodically conducted to establish baselines for
presumed income among common types of businesses.
Economic development initiatives are aggressively implemented to improve the
business climate, e.g. improving roads and telecommunications networks, improving
peace and order situation, improving traffic management in busy commercial districts.
The database of business establishments is updated weekly.
Establishment of a one-stop shop so that business permit can be obtained in one day.
o Aggressive revenue goal-setting. While the majority of the LGUs on historical
trending to set revenue goals for the year, do we sets goals based on the national growth
rate of taxes in order to make sure that the LGU keeps in step with the revenue growth
of the national government?
3. Nontraditional Sources of Funds (Treasury functional area)
o Generating grant funds. LGU indicates that it solicits grant funds from a broad base
of sources to augment their revenues. These include international grants, Community
Development Funds, grants from national government agencies, and
grants/sponsorships from private firms. The Local Chief Executive plays a prominent
role in these efforts.
o Maximizing revenues from economic enterprises. LGU indicates that it actively
utilizes economic enterprises as an important source of supplemental revenues for the
LGU. New economic enterprise projects are pursued and LGU assets are maximized to
generate additional revenues for the LGU (e.g. the development of Level II Water
System Project, full operationalization of Public Market, commercialized Memorial
Park, etc.).
4. Control Mechanisms on Fund Management (Accounting and Treasury functional
areas)
o Compliance with COA guidelines on fund management. The LGU indicates that it
relies on strict compliance with guidelines issued by COA to ensure proper management
control over all cash transactions. These include:
Collectors follow a daily collection schedule and either a same-day or next-day
bank deposit schedule.
There is a regular schedule for remitting and auditing cash collections.
LGU bank accounts are reconciled on a regular basis (either weekly or monthly).
There is a limit on the amount for cash disbursements by the LGU (e.g.
PhP50,000) and no direct disbursements are allowed from cash collections.
There is a regular review of variances between actual collections and target
collections and this is utilized to review the performance of collectors.
Daily cash flow reports are generated to inform the Local Chief Executive and
other department heads of any issues in cash management.
Disbursements are contingent on availability of cash flows as monitored by the
LGU Treasurer.
Memoranda of Accounting are issued to non-complying liquidating officers.
As a management control measure, there is a regular job rotation in the Office of
the Treasurer to prevent staff members from being in one position for too long.
o Maximizing liquid assets. LGU employs a regular process to review monthly cash flow
forecasts and identify funds that will not be utilized in the near-term. The idle funds are
placed in time deposits and high-earning savings accounts that are scheduled to mature
only when the funds are scheduled for disbursement.
5. Local Budgeting (Budgeting functional area)
o Compliance with DBM guidelines on budget preparation. The LGU indicates that it
strictly follows the budget schedule and processes mandated by DBM with regard to
budget preparation, budget authorization, budget review, budget execution, and budget
accountability. LGU budgets are consistently prepared and authorized in time for the
beginning of the next fiscal year.
o Budget variance. LGU indicates that it generates regular revenue and expenditure
reports (weekly or monthly) to analyze budget variances. Variances between actuals and
targets are investigated and addressed by the department heads concerned.
o Budget forecasting. LGU indicates that it relies primarily on historical trends (e.g.
patterns of expenditures over the past three or five years) as the basis for developing
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departmental budgets. Furthermore, expenditure ceilings are set based on past

performance of the various departments.
o Consultative process. LGU indicates that it that it utilizes a consultative approach to
budget preparation that involved multiple stakeholders throughout the entire process.
These include:
Legislative and Executive budget hearings that are open to the public and are one
basis for prioritizing programs.
Annual strategic planning meetings between the LFC and the various department
heads of the LGU are scheduled at the onset of the budget cycle.
The collective review of the proposed budget of the Local Chief Executive by
the LFC and department heads before submitting the proposed budget to
Sangguniang Bayan for budget authorization.
6. Expenditure Management (Budgeting, Accounting, and Other Finance-related
functional areas)
o Compliance with COA and DBM processes. LGU indicates that it that it relies on
compliance with guidelines of DBM and COA to ensure proper management control
over expenditure management. These include:
Cash disbursements are contingent on budget appropriations and allotments.
Project statements and supporting documents are prepared and reviewed before
appropriations are approved by the Budget Officer.
Special funds, specifically the Special Education Fund and Trust Funds, are
strictly maintained and the funds are spent on specific purposes mandated.
Special accounts for economic enterprises, debts, and development projects
are strictly maintained and the funds are spent on the specific purposes for which the
accounts were created.
Separate statements of income and expenditure are maintained for economic
enterprises.
o Special appropriations.
LGU indicates that it maintains special
appropriations for debt service and remittances to national government agencies in
order to prioritize those expenditures.

7. Compliance with Accounting System and Financial Reporting Standards

(Accounting functional area)
o Compliance with COA guidelines for accounting and financial reporting. Compliance
with the accounting and reporting standards of COAs New Government Accounting
System (NGAS) is the primary concern.
o Availability of financial information. LGU indicates that that financial information,
such as reports on revenue generation, IRA receipts, and expenditures, are displayed in
publicly accessible places such as bulletin boards in the LGU administration building,
police station, markets, churches, internet, etc.
o Implementation of Electronic-NGAS. Several LGUs indicated that they have adopted
or are in the process of adopting E-NGAS, which is the computerized accounting system
of COA that is recommended but not required by COA. This system has simplified and
streamlined the accounting processes of the early adopters among the LGUs.
o Inventory of fixed assets. A very common but important accounting issue faced by
LGUs is the determination of an accurate and up-to-date inventory for the Property,
Plant, and Equipment of the LGU. However, other LGUs are addressing this issue by
creating Inventory Committees or Task Forces to conduct a complete inventory of
Property, Plant, and Equipment and align the accounts of the Accounting and General
Services Departments. Once completed, these LGUs will finally have accurate
accounting and technical information regarding their fixed assets. What action the LGU
has for now?
8. Link between Planning and Budgeting (Budgeting and Other Finance-related
functional areas)
o Budgets operationalize local plans. LGU indicates that it that it strives to
operationalize the local development plans of the LGU through the annual budgets.
Various planning documents are regularly developed and updated with multi-sector
participation. These include:
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Local Development Plans are developed by a multi-sector Local Development

Council and are utilized to develop annual budgets. These plans set out Local Chief
Executives vision for the LGU and are developed into multi-point agenda, which is the
key basis for prioritizing expenditures.
Multi-year Local Development Investment Programs are developed with multisector participation and are utilized to develop Annual Investment Plans. The strategic
planning for capital investments is led by the MPDO.
9. Practices on Procurement (Other Finance-related functional areas)
o Safeguarding valuable assets. LGU indicates that it implements various practices to
secure valuable assets. These include:
Memoranda of Receipt are issued to department heads when equipment and
Valuable property, plant, and equipment are insured to safeguard these assets.
Auxiliary Police are used to safeguard major properties and assets.
o Implementation of Revised Procurement Law. LGU indicates that it implements
procurement activities in full adherence to the mandates of the Prwocurement Law
including its recent issuances.
10. Financial Performance Management (All functional areas)
o Internal financial reporting. LGU indicates that it relies mainly on internal financial
reports to monitor the financial performance of the LGU.
Regular revenue and expenditure variance reports (weekly or monthly) are generated
to analyze budget variances. Variances between actuals and targets are investigated and
addressed by the department head concerned. The Local Chief Executive is kept abreast
of financial issues that emerge.
As per COA guidelines, the LGU Accounting prepares quarterly trial balance sheets
and statements of income and expenditures. These are analyzed to identify potential
financial management issues within the LGU.
o Other mechanisms to monitor performance. One LGU in the shortlist utilizes a
separate body to monitor development projects. A multi-sector Project Monitoring
Committee monitors the progress of all development projects funded by the Local
Development Fund and by national government agencies.

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