Local Government Finance and the Local Treasury
Fiscal autonomy and the treasury's place
RA 7160 Book II gives LGUs taxing and spending authority subject to national law. The local treasury is the custody function: the treasurer receives and safeguards funds, while the budget officer prepares the budget and the accountant keeps the books. The treasurer is appointed by the Secretary of Finance from at least three eligible recommendees of the local chief executive and may be removed only for cause. This insulation matters: the treasurer answers for cash even when pressured by local officials.
Revenue classes
- Tax revenues: real property tax, local business tax, community tax.
- Non-tax revenues: fees, charges, fines, rentals, income from economic enterprises.
- External shares: national tax allotment, shares in national wealth, grants. Classify correctly because reports separate tax from non-tax and the sanggunian's ordinance authority differs.
Custody and depository
The sanggunian designates the depository bank; funds go to the LGU account, not an official's account. Collections are deposited intact. The treasurer certifies availability of funds for disbursements, but that certification does not create spending authority - the appropriation does.
Worked example
A taxpayer pays P25,000 real property tax on Friday. The treasurer issues an official receipt, records it in the collection report, and deposits the full P25,000 on the next banking day. The treasurer does not deduct an office allowance or use P5,000 for supplies. If payroll is due, it must be funded from the authorized cash program and processed through a disbursement voucher, not from the RPT collection.
Traps
- Treating the treasurer as the budget approver.
- Assuming appointment by the mayor; it is the Finance Secretary.
- Netting collections against expenses.
- Using an unauthorized bank or personal account.