Tuesday, July 15, 2014

Good Stewards or Not? Basey on Money Matters

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.