How do you know if your local government is managing its finances well?
Extra cash and construction projects are not enough signs. The purpose of
grading the LGUs on how they raise and handle funds is not just to keep them on
their toes, to encourage them to be transparent. It’s also to arm them with the
correct information and assessment so their plans will be more realistic and
strategic. With a good grip on their finances, both anticipated and on hand,
LGUs can make reliable forecasts, do accounting, and institute an early warning
system in their operations and spending.
Simply, the indicators that experts look for can guide citizens in
gauging the financial management style of their local government. There are
three areas to look at. Let us analyze these areas vis-à-vis the fiscal management
of Basey.
- From where it’s earning or is expected to earn, and how much (revenues and incomes).
To get the idea if an LGU is earning
enough and if it’s exerting effort to increase earnings, look at the “revenue
indicators.” What is the amount targeted for collection over a certain period
of time? How much of this is actually collected? Was the amount it spent on
collection efforts higher than the taxes or fees it collected?
Basey relies on Internal Revenue
Allotment. It comprised the bulk of municipal total revenues. For 2012, IRA
represents 77% of the total revenues; 92% for 2011 and 84% for 2010. Our
collection from local income, particularly real property tax, is low as
compared with the total revenues or about 1.2% (2012); 1% (2011 and 2010). Poor
tax collections is a common problem among LGUs nationwide. A study by the
National Tax Research Center shows that LGUs had an average tax collection
efficiency rate of 58% from 1993 to 2004. I don’t know the tax collection rate
of Basey.
- What it intends and has to spend on (expenditures).
The “expenditure indicators” can be derived by asking:
How much is it spending on certain activities and services over a certain
period of time? How much goes to social, health services, infrastructure,
environmental protection, budget and planning, etc? As can be gleaned from 2012
COA Report, there was no expenditure on health services. How much is invested
in things that will make Basey earn more? Are the salaries of employees and the
maintenance of the town hall eating much of the budget?
The municipality has about 14 operating departments
with a total of 123 regular work force. However, based on the COA report for
2012, disbursements for personal services in the amount
of P48,386,168.67 exceeded the 45% general limitations on budgeting by
P5,444,753.97, in violation of Section 325 (a) of the Local Government Code of
1991 or RA 7160, thus, depriving the municipality of the use of funds for other
crucial social services and priority development projects. Indeed, the
expenditures for salaries is about 48% of the total expenditures of the
municipality.
- What it owes (debt).
The total loans payable of Basey is P50,477,912.41
as of December 31, 2012 as shown below. (COA Annual Audit Report) As of December 31,
2011 and 2010, loans payable - Domestic amounted to P39,236,849.01 and P33,079,749.95,
respectively. Then you can ask: How much of the budget goes to paying loans?
Comparing the outstanding balance of loans payable for 2012 and 2011, Basey LGU
is not paying its loans from DBP – Catbalogan in the amount of P25 million;
National Housing Authority (P3.136 million) and Pag-Ibig (P6 million) for the CY 2012.
Obviously, penalties and surcharges will be imposed by the bank on us, thereby,
a financial burden to the municipality’s coffers. For 2012, the municipality
incurred additional loans from DBP – Catbalogan in the total amount of P12,875,330.59.
Is the investment funded by the loans earning or not? The COA Report does not
provide.
In the end, the Basaynon should be able to know if
the LGU is financially strong or weak, and what’s causing the strength or the
weakness. It’s for us to determine based on the facts stated above.