Are the LGUs short of money?

We all know that the Department of Interior and Local Government (DILG) plays a very crucial role in the country. It is responsible for strengthening the capabilities of local government units, for promoting peace and order, ensuring public safety, and is on top of the Philippine National Police. That said, the person placed in this position must be able to communicate, redirect, command and gain full respect of the people he works with.

Mar Roxas was given this job by the President. Whether it is a political move or an administrative one to continue the work already done by the former DILG secretary, I pray that Secretary Roxas will be able to attain full discernment to be able to do what is right and what is needed for the country.

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As a taxpayer, I have always wondered why many local government units cannot seem to provide quality services to the citizens. I truly feel we are being short-changed of the money we pay the government. But if you calculate the tax collected from the people you will see that the money collected is not enough. This is because only a few people pay tax. The taxpayers definitely feel short-changed because we work so hard but our money is mostly spent on services for non-tax payers. The government must create an intensive program to improve the lives of the marginalized (thru education, housing, employment) to sustain them for life and so that in time they can begin to contribute to the country as well.

The money that can be spent by local governments comes from internal and external sources. The external sources are: (1) the Internal Revenue Allotment (IRA) – where LGUs are entitled to get 40% of this tax (it includes income tax, VAT and excise taxes); (2) the Share from the utilization of National Wealth – where LGUs are entitled to get 40 % of the National Government’s gross collection in the preceding fiscal year (from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees or charges); from (3) Grants and donations – LGUs may secure financial grants or donations from local and foreign assistance agencies. Other forms of grants may be fund allocation from Senators or Congressmen or special projects from the President or other national agencies; and from (4) Domestic loans and credit-financing schemes – LGUs may contract loans and other forms of indebtedness from governments or private banks and lending institutions.

Each local government unit may also create its own revenues in the form of local taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide. Collections from these sources shall accrue exclusively to the local government concerned.

How are these taxes distributed? Local governments get a 40% share of the national internal revenue. This 40% is divided among the local government units as follows: 23% for provinces; 23 % for cities; 34% for municipalities; and 20% for barangays.

The amounts allocated for each LGU is further distributed to determine the share of each province, city and municipality using this criteria: Population – 50%, land area- 25%, equal sharing – 25%. No wonder many LGUs are very conscious of efforts directed to changes in municipal boundaries because it will directly affect their revenues. LGUs with larger population size and/or land area will get a bigger share of the revenue allocation.

Look at this sample computation. The Assumptions: If the national internal revenue is P500 billion and the number of barangays is 42,008, then, the share for the LGU will be P500 billion times 40 percent which is P200 billion. The share for the barangay will be P200 billion times 20 percent which is P40 billion. The average share for each barangay will be P40 billion divided by 42,008 barangays which equals P952,200.00. The average revenue per month per barangay (P952,200 divided by 12) will only be P79,350.00. Clearly, this is not enough. As a result some barangays create business clearances and parking fees which oftentimes become an issue because the officers at the municipal level take this income from them.

Barangays are authorized to generate income from taxes on stores or retailers with fixed business establishments and gross sales or receipts in the preceding year of P50,000 or less in cities and P30,000 or less in municipalities at the rate not exceeding one percent (1%) on such gross sales or receipts.

Oftentimes, local government budgets and spending do not pass the scrutiny of the civil society. So, how do we know if the money is being spent wisely and solely for public service? It is unfortunate that there is no assessment mechanism for us to check. But surely over a period of time, we are able to see tangible results of the services given which could be our basis of the expenditures.

On the national level, we have the Commission on Audit which is a constitutional body mandated to perform the audit of all financial transactions of the LGU. COA must ensure that there is no irregular, unnecessary or extravagant expenditure of the LGUs. But is COA on top of everything? They are our eyes to possible corruption.

In the Local Government Code, internal control of LGUs is a responsibility of the local accountant. If this accountant is easily manipulated by city officials then there lies the problem. In 2003, GMA issued AO No. 70 directing LGUs “to organize an Internal Audit Service in their respective offices.” The primary responsibility of ensuring effective internal control is on the Local Chief Executive.

The Local Government Code (LGC) of 1991 paved the way for greater local autonomy in an effort to bring government closer to the people. This decentralization of power may have proven to be the instigator for corruption to thrive in the local government units. Early on there should have already been mechanisms in place for transparency and accountability in local budgeting and spending.

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Tomorrow is my late father, Maximo V. Soliven’s birth anniversary. It’s been six years now since he passed away but his spirit still lives on in our hearts and minds.

Happy Birthday, papa!