STATEMENT OF RECEIPTS AND

EXPENDITURES REPORT

Statement of Receipts and Expenditures Report | Bureau of Local Government Finance 1

 Learning objectives

At the end of this session, the participants should be

able to know and understand:
• Nature and concept of fiscal decentralization;
• The four (4) pillars or building blocks of fiscal
decentralization; and
• The composition of Statement of Receipts and
Expenditures Report and its relevance.

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 FISCAL DECENTRALIZATION

Four
Fiscal Decentralization refers to the public finance dimension of
Pillars intergovernmental relations. It specifically addresses the reform of
the system of revenue source and expenditure functions transfers
from the central to sub-national governments.

The four (4) pillars or building blocks of fiscal decentralization are:

Assignment Designing Structuring

Fiscal Allocating
of Expenditure Intergovernmental Sub-National
Decentralization Revenue
Responsibilities Transfers Borrowing/
Sources

= + + + Debt

Source: An Overview of Fiscal Decentralization, World Bank, Feruglio and Anderson, 2008

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 Allocating Revenue Sources

Definition
Distribution of financial resources among the different levels of government

Importance
It ensures sub-national autonomy, promotes accountability and
ownership, realizes decentralization efficiency gains and facilitates
cash flow management

Basic Principles
• Revenue Potential
• Economic Efficiency
• Equity
• Administrative Feasibility
• Politically Acceptability

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 Assignment of Expenditure Responsibilities

Definition
Distribution of functions among the different government levels

Importance
Financing should follow functions. It is important to clearly define the
assignment of expenditure responsibilities in order to enhance accountability,
avoid unproductive overlap, duplication of authority and legal challenges

Basic Principles
• Efficiency Criteria/Subsidiary Principle
• Service of Benefit Area
• Economies of Scale
• Cultural Values
• Size and diversity

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 Designing Intergovernmental Transfers

Definition
Transfer of finances from the central government to lower government levels

Importance
Revenue assignment never matches the expenditure needs, so
intergovernmental fiscal transfers are often necessary to assure revenue
adequacy

Objectives
• Bridging the vertical fiscal gap
• Improve horizontal fiscal balance
• Fund national priorities
• Compensate for spillovers or externalities

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 Structuring Sub-National Borrowing/Debt

Definition
Capacity for sub-national governments to borrow money to cover their
expenditure responsibilities

Importance
Financing capital infrastructure expenditure and tax flows and to foster
political accountability

Sources
• Direct borrowing by central government and on-lending to sub-national tiers
• Through a public intermediary a state-owned financial institution
• Direct borrowing from capital markets sub-national or foreign markets
• Through market decentralization of public services

To overcome negative effects of subnational borrowing, the key element is the design of
the regulatory framework under which borrowing powers are decentralized

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 Local Government Code

Book II Book I Book II Book II

(Title I & II): (Section 17): (Title III): (Title IV):
Local Basic Share of LGU Credit
Government Services and in the Proceeds Financing
Taxation Facilities of National
Taxes

Allocating Revenue Assignment of Designing Structuring

Sources Expenditure Intergovernmental Sub-National
. Responsibilities Transfers Borrowing/Debt
. .

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 STATEMENT OF RECEIPTS AND EXPENDITURES REPORT

Current Operating Income

Allocating Local
Revenue Sources Government
Taxation

Statement of Receipts and Expenditures Report | Bureau of Local Government Finance 9

 STATEMENT OF RECEIPTS AND EXPENDITURES REPORT

Current Operating Expenditure

Assignment of Basic Services

Expenditure and Facilities
Responsibilities

Statement of Receipts and Expenditures Report | Bureau of Local Government Finance 10

 STATEMENT OF RECEIPTS AND EXPENDITURES REPORT

Non-Income Receipts

Designing Share of LGU in

Intergovernmental the Proceeds of
Transfers National Taxes

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 STATEMENT OF RECEIPTS AND EXPENDITURES REPORT

Non-Operating Expenditure

Structuring Credit Financing

Sub-National
Borrowing/Debt

Statement of Receipts and Expenditures Report | Bureau of Local Government Finance 12

 FISCAL DECENTRALIZATION

Four
Fiscal Decentralization refers to the public finance dimension of
Pillars intergovernmental relations. It specifically addresses the reform of
the system of revenue source and expenditure functions transfers
from the central to sub-national governments.

The four (4) pillars or building blocks of fiscal decentralization are:

Assignment Designing Structuring

Fiscal Allocating
of Expenditure Intergovernmental Sub-National
Decentralization Revenue
Responsibilities Transfers Borrowing/
Sources

= + + + Debt

Source: An Overview of Fiscal Decentralization, World Bank, Feruglio and Anderson, 2008

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 STATEMENT OF RECEIPTS AND EXPENDITURES REPORT

1
4
2

1 – Allocating Revenue Resources

2 – Designing Intergovernmental Transfers
3 – Assignment of Expenditure Responsibilities
4 – Structuring Sub-National Borrowing Debt

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 References

• An Assessment of the State of Knowledge

Concerning Decentralized Governance under the
Philippines' 1991 Local Government Code;
Rood, Steven
• Local Government code of 1991

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 Thank
You

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