Money problems, other basic issues still hound LGUs

SEVENTEEN years after the implementation of the Local Government Code (LGC), Local Government Units (LGUs) continue to struggle with many issues and basic functions mainly due to funding problems, according to a consultant’s report for an Asian Development Bank (ADB) technical assistance to the Philippines.

The report titled “Philippines: Local Government Financing and Budget Reform,” said ADB technical assistance for the Japan Special Fund-financed project, showed that one of the biggest concerns of LGUs was the “lack of completeness, timeliness, and transparency in intergovernmental transfers.”

The report said that in four of the six years between 1998 and 2004, the Internal Revenue Allotment (IRA) for local government units was not appropriated in full.

The gap between appropriation and obligation ranged from P1.5 billion to as much as P16.5 billion.

“For lower-income class LGU, the IRA can constitute as much as 88 percent to 95 percent of their regular income.

This level of dependency makes it critical that the IRA is delivered completely and in a timely manner. However, this was not the case in some years,” the report said.

“This is further complicated by deficiencies in the Codal formula itself which caused the IRA of many provinces and municipalities to be insufficient to even cover the cost of devolved functions, the report said.

It also said that in other intergovernmental transfers, technical and complicated administrative procedures have delayed, if not prevented,  the release of some LGU’s shares in national wealth. Under the code, the report said LGUs have a 40-percent share in taxes collected for the exploitation of national resources within their jurisdiction.

The report also said that complications in accurately estimating the taxes as well as lack of information on the situs of the tax has created uncertainty in this source of intergovernmental revenue. This is also the case in the share of LGUs in the proceeds collected from the value-added tax.

There is also a lack of transparency in reporting congressional grants such as the Priority Development Assistance Fund, the report said.

Further, other problems persist, such as the weak coordination between national government and LGU planning. This has resulted in the inconsistent planning chain like the one observed in regional and provincial planning levels.

The report said that local officials even report that their investment plans are formulated independently of regional and national investment plans and vice versa.

“Less than 70 percent of provinces have up-to-date local development plans and annual-investment plans, which are oftentimes not linked to each other. Furthermore, AIPs do not appear to be anchored in clear goals, strategies and programs since many LGUs, including cities and municipalities, do not perform systematic evaluation of project’s costs and benefits,” the report said.

Other problems also persist, the report said, like unclear expenditure assignments and overlapping service delivery mandates, lack of effective performance measurement system, lack of LGUs in accessing credit financing; and inadequate own-source revenues and inefficient tax administration.

Many of these problems must be resolved through legislation. the report said although it also noted that LGUs have problems dealing with the legislature. This problem caused some resistance on the part of the legislature to file bills to improve local revenue generation.

“It was reported that there exists underlying friction and competition between some members of Congress, who are also members of the House Committee on Local Government, and local chief executives,” the report said.

“This resistance was strong enough to bar the draft bill in spite of consultations with the House Committee and letters of endorsements from the Department of Interior and Local Government secretary and the President of the League of Provinces of the Philippines and the League of Municipalities of the Philippines,” it said.

The passage of the Local Government Code of 1991 was a considered a landmark legislation because it not only transferred the responsibility for the provision of basic services from the central government to LGUs.

The LGC also provided the resources to perform these functions through a system of intergovernmental fiscal transfers like the IRA. It also granted the increase of powers to generate own-source revenues, both tax and non-tax revenues for LGUs. –Cai U. Ordinario / Reporter, Businessmirror