Responsibilities of
Local Government Unit * the giving of allotments and grants by the national government (NG) to local government units (LGUs) * sharing of taxing powers between the NG and the LGUs, and among LGUs units * policy on tax rates and structure * revenue and expenditure planning * revenue utilization and expenditure allocation * monitoring and approval of budgets, tax ordinances and other fiscal measures * policy on borrowing and borrowing instruments * appointment and supervision of local fiscal officers

Fundamental Principle * No money shall be paid out of the local treasury except in pursuance of an appropriations ordinance or law * Local government funds and monies shall be spent solely for public purposes * Local revenue is generated only from sources expressly authorized by law or ordinance, and collection thereof shall at all times be acknowledged properly * All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for as local funds, unless otherwise provided by law * Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received * Every officer of the local government unit whose duties permit or require the possession or custody of local funds shall be properly bonded, and such officer shall be accountable and responsible for said funds and for the safekeeping thereof in conformity with the provisions of law * Local governments shall formulate sound financial plans, and the local budgets shall be based on functions, activities, and projects, in terms of expected results; development plans, goals, and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources * Local budgets shall operationalize approved local development plans * Local government units shall ensure that their respective budgets incorporate the requirements of their component units and provide for equitable allocation of resources among these component units * National planning shall be based on local planning to ensure that the needs and aspirations of the people as articulated by the local government units in their respective local development plans are considered in the formulation of budgets of national line agencies or offices * Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units * The local government unit shall endeavor to have a balanced budget in each fiscal year of operation

1. Elective Officials- The fiscal administration is performed by its elected officials who have 3-year terms as provided for by Section 8 Article X of the
Constitution, to wit:
The term of office of elective local officials, except barangayofficials, which shall be determined by law, shall be three years and no such official shall serve for more than three consecutive terms.Voluntary renunciation of the office for any length of time shall notbe considered as an interruption in the continuity of his service forthe full term for which he was elected.
This broad definition comprehends five major elements as the scope of local fiscal administration.These are:
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Systems;
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Structures;
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Processes;
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Official/personnel; and
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Policy environment governing inter-governmental and inter-local fiscal relations.
The first four elements can be interpreted as comprising the internalenvironment of local fiscal administration, while the policy environment ispart of the larger external environment of local fiscal administration.
The definition likewise underscores inter-governmental and inter-localfiscal relations that transpire between national and local governments andamong the latter (e.g. giving and receipt of allotments/grants, sharing oftaxing powers between central government and LGUs, among the latter,allotment sharing among LGUs).
All definitions have common areas.All of them refer to revenuegeneration and revenue allocation/utilization as part of the scope of localfiscal administration.
Local fiscal administration refers to the rational, effective and efficientconduct of the fiscal functions and operations of local government unitswhich embrace the systems, structures, processes and human resourcesinvolved in revenue generation, revenue allocation and utilization.Inaddition, such conduct of fiscal affairs is governed by laws and is affectedby the fiscal policy environment, which defines central-local and inter-LGUfiscal relations.
Local Fiscal Administration involves revenue generation, the rationalallocation, utilization and control of resources through the concept ofperformance budgeting by the local government units (LGU) to optimizethe use of public funds for the benefit of the greatest number of people. Itdraws strength and rationality from the Constitutional provision of grantinglocal government the power to create their own sources of revenuethrough local taxation.
In public administration, local fiscal administration is commonly referred toas the formulation, implementation, and evaluation of local fiscal policiesby local governments.
Among others, these fiscal policies set the framework and procedures onlocal revenue generation that includes property tax administration, revenueordinance codification as well as the operations of local economic enterprises.
It also deals on the national government allotments, shares and subsidiestogether with the availment of credit financing through domestic andforeign institutions.
Local Government Finances
Fiscal relations between national and local government centre on the following major areas of fiscal administration:
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Allotment of internal revenue shares;
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Shares of local governments in national wealth exploitation;
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Shares of earnings of government agencies or government- owned or controlled corporations engaged in the utilization and development of national wealth;
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Local government borrowing; and
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Review of local government budgets.
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Aspects of local fiscal administration
The major aspects of local fiscal administration are the fiscal relationsbetween the national government and local governments, and among thelocal government units, to wit:
1. The fiscal relations between the national government and itsagencies, on the one hand, and the LGUs on the other, which we maycall vertical financial relations.This is also referred to in the literatureas central-local fiscal relations, with the Internal Revenue Allotments atits core; and
2.The fiscal relations among LGUs themselves, which may be referred to as the inter-local fiscal relations.
Scope
The definitions of local fiscal administration enumerated the areas covered.However, it is helpful to specify once more the scope of the field accordingto their functional categories, which fall into the main traditional divisions of:
a.
Revenue Generations
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All aspects of local taxation;
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Borrowing and its management;
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Operation of public enterprises;
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Revenue enhancement measures;
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Revenue planning, forecasting and accounting;
b.
Revenue Allocation and Utilization
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Budgeting system and process, including the linkage ofplanning and budgeting, expenditure planning, expenditureallocation and expenditure monitoring;
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Accounting and auditing of expenditures;
c.
Other Aspects
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Property and supply management;
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Internal control which cuts across all fiscal functions; and
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Other related matters, like the central grant and allotmentsystem, organization for local fiscal administration, andcomputerization of fiscal operations/systems.
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Power to Create their own sources of revenue
Section 5 Article X:Each local government unit shall have thepower to create its own sources of revenues and to levy taxes, feesand charges subject to such guidelines and limitations as theCongress may provide, consistent with the basic policy of localautonomy. Such taxes, fees, and charges shall accrue exclusivelyto the local governments.
Local Governments are authorized to create and formulate projectsas sources of revenue.As such, local governments are authorizedto issue bonds, debentures, securities, collateral notes and otherobligations to finance self-liquidating, income-producingdevelopment and livelihood projects. However the power given tolocal governments in the issuance of bonds and other long-termsecurities is subject to the rules and regulations of the Central Bankand the Securities and Exchange Commission (Section 299). TheDepartment of Budget and Management has the power to reviewappropriation ordinances of provinces, highly urbanized cities,independent component cities and the municipalities within theMetropolitan Manila Area (Section 326).
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A just share in national taxes
Since financing is a crucial aspect of the success of decentralizationand local autonomy, the 1987 Constitution goes beyond the meregranting to LGUs the power to create their own revenue sources byadding Section 6 of Article X with provides to wit:
Local government units shall have a just share, as determined bylaw, in the national taxes which shall be automatically released tothem.
The Local Government Code of 1991 reiterated such provision ofthe Constitution by providing for the automatic release of the InternalRevenue Allotment (IRA).
In accordance with law, the LGUs’ share in local taxes collected bythe Bureau of Internal Revenue three years before or says the 2009share will be based on the 2006 collection. Of the total local taxes, the lgu will have 40 percent while the national government gets the balance

Local governments, in addition to the internal revenue allotment,have a share of 40 per cent of the gross collection derived by thenational government from the preceding fiscal year from miningtaxes, royalties, forestry and fishery charges, other taxes, fees, orcharges, including related surcharges, interests or fines and from itsshare in any co-production, joint venture or production sharingagreement in the utilization and development of the national wealthwithin their territorial jurisdictions (Section 290). Local governmentslikewise have a share based on the preceding fiscal year from theproceeds derived from any government agency or government-owned or controlled corporation engaged in the utilization anddevelopment of the national wealth based on the following formulawhichever will produce a higher share for the local government unit:
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1 per cent of the gross sales or receipts of the preceding calendar year; or
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40 per cent of the mining taxes, royalties, forestry andfishery charges and such other taxes, fees or charges, includingrelated surcharges, interests, or fines the government agency orgovernment-owned or controlled corporation would have paid if itwere not otherwise exempt (Section 291).

general Welfare Clause [Sec. 16, RA 7160]: Every local government unit shall exercise the powers expressly granted, thosenecessarily implied therefrom, as well as powers necessary,appropriate, or incidental for its efficient and effective governance,and those which are essential to the promotion of the generalwelfare. Within their respective territorial jurisdictions, localgovernment units shall ensure and support, among other things, thepreservation and enrichment of culture, promote health and safety,enhancethe right of the people to a balanced ecology, encourageand support the development of appropriate and self-reliantscientific and technologicalcapabilities, improve public morals,enhance economic prosperity and social justice, promote fullemployment among their residents, maintain peace and order, andpreserve the comfort and convenience of their inhabitants.
The general welfare clause is the statutory grant of police power tolocal government units.As such, LGUs may in the exercise ofpolice power under the general welfare clause, order the closure ofbank for failure to secure the appropriate mayor’s permit andbusiness licenses (Rural Bank of Makati vs. Municipality of Makati)
It likewise has the authority to issue permits to operate cockpits and for holding of activities for any charitable or welfare purpose
Power to Generate and Apply Resources [Sec. 18, RA 7160]
- Local government units shall have the power and authority to establish an organization that shall be responsible for the efficient and effective implementation of theirdevelopment plans, program objectives and priorities; to create theirown sources of revenue and to levy taxes, fees, and charges whichshall accrue exclusively for their use and disposition and which shall be retained by them; to have a just share in national taxes which shall beautomatically and directly released to them without need of anyfurther action; to have an equitable share in the proceeds from theutilization and development of the national wealth and resourceswithin their respective territorial jurisdictions including sharing thesame with the inhabitants by way of direct benefits; to acquire,develop, lease, encumber, alienate, or otherwise dispose of real orpersonal property held by them in their proprietary capacity and toapply their resources and assets for productive, developmental, orwelfare purposes, in the exercise or furtherance of theirgovernmental or proprietary powers and functions and therebyensure their development into self-reliant communities and activeparticipants in the attainment of national goals.

uthority to negotiate and secure grants [Sec. 22, RA 7160]
- Local chief executives may, upon authority of the sanggunian, negotiate and secure financial grants or donations in kind, in support of the basic services orfacilities enumerated under Section 17 hereof, from local andforeign assistance agencies without necessity of securing clearanceor approval therefor from any department, agency, or office of thenational government or from any higher local government unit:Provided, That projects financed bysuch grants or assistance withnational security implications shall be approved by the nationalagency concerned: Provided, further, That when such nationalagency fails to act on the request for approval within thirty (30) daysfrom receipt thereof, the same shall be deemed approved.