MANILA, Philippines – Budget Secretary Benjamin Diokno called on local government units (LGUs) to correct the “unfavorable balance” in their spending patterns, saying they are not spending enough on social services.

In a recent forum with local treasurers, Diokno said expenditures on social services accounted for only 25% while general public services took up 55% of LGU funds from 2009 to 2014.

“Bulk of funds are spent on local administrative functions instead of education, health and nutrition, population control, labor and employment, housing and community development, social welfare and so forth,” he said last week.

According to Diokno, the ratio is an “unfavorable balance,” as spending on social services should increase as the country’s population rises.

Diokno attributed this problem to poor revenue generation in local governments. Most LGUs depend on their Internal Revenue Allotment and shares in other national taxes to fund operations.

Under the 2017 national budget, some P486.9 billion has been alloted for local government’s IRA, a 12% increase from last year’s P428.62 billion.

DBM said that for many LGUs, 90% of financial resources are from the IRA.

Data from 2009 to 2014 indicate that, on average, 80% of the operating incomes of municipalities and provinces were sourced from national government transfers.

“Simply put, local governments are not spending enough on things that matter the most to the people they serve,” Diokno said.

End IRA-dependence

The budget secretary urged local treasurers to end dependence on IRA. To promote local autonomy, he said that revenue-generating powers of LGUs should be fully utilized.

He also said that strong performance evaluation mechanisms must be developed to demand accountability from local executives.

In 2012, the DBM devised the “Public Finanacial Management Assessment Tool” to help LGUs self-assess fiscal performance. This year onwards, the budget department will be conducting trainings for local officials and personnel to use this tool.

Better financial management at the local level will help achieve the country’s medium-term goal of ramping up growth to 8% annually and will help lower poverty from 22% to 14%, said Diokno.

According to him, the government introduced tools to help local fiscal statistics more available to the public and ultimately enhance the delivery of public services.

“For a country of more than 100 million, the national government will be hard-pressed to respond to the needs of each citizen. Clearly, the direction we’re headed is to empower local governments in the way they manage their finances,” he added.

Better public financial management

During the 16th Congress, the proposed Public Financial Management Accountability Act was not passed. It aimed to strengthen the Congress’ power of the purse and address the gaps in the system.

In 2016, this administration announced its commitment to implement budget reforms.

Diokno earlier told Rappler that the department’s goal is to have a Budget Reform Act which will address previous administration’s abuses in crafting the country’s fiscal plan. (READ: DAP: ‘Budget within a budget, illegal’)

Their objectives include preventing underspending and making budgets more “open” or more accessible to the public.

In the meantime, the DBM shows its commitment to implement reforms through a Joint-Memorandum Circular signed last November 2016 with the National Economic Development Authority, Department of Finance and Department of the Interior and Local Government.

The issuance aims to harmonize local planning and performance monitoring in overseeing financial management in LGUs. – Rappler.com