FISCAL/FINANCIAL PERFORMANCE

INDICATORS AND BENCHMARKS

Erlito R. Pardo

Development Academy of the Philippines

Source: ADB TA Study 4778 for DILG and DOF

DAP-CFG Seminar-Workshop on Updating Local Revenue Code

Concept and Significance of

Fiscal/Financial Performance
Indicators

developed by the Bureau of Local Government Finance,

Department of Finance to provide a brief assessment of
the financial health of LGUs
designed as a reliable substitute for a thorough
performance appraisal of the financial condition of an
institution, program or project

strategic planning and forecasting

performance accounting and benchmarking
early warning system
quality management
incentive system

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Fiscal/Financial Performance Indicators

Revenue Indicators
1.
2.
3.
4.

revenue target accomplishment rate

real property tax accomplishment rate
cost to collection ratio
revenue per capita

Expenditure Indicators

5. expenditure rate
6. social expenditure rate
7. economic expenditure rate
8. personal services expenditure rate
9. internal financing ratio
10.expenditures per capita

Debt Indicator

11.debt servicing ratio

Overall Financial Indicators

12.cash target accomplishment rate

13.savings rate
14.dissavings rate
15.enterprise profitability rate

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Seminar-Workshop on Updating Local Revenue Code

Major Fiscal Issues Confronting the LGUs

Increasing inability of LGUs to fund the growing demand for
delivery of basic services
LGUs in general face a financing problem the fiscal gap a
gap bet. perceived service needs and available financial
resources. How does urbanization influence the fiscal gap?
The increase in demand for public services is mostly driven by
growth in population caused by natural growth and migration, not
to mention the natural tendency of people in nearby towns to avail
of basic urban services (e.g., health and education).
One classic example is in terms of property values.
While property values tend to rise with urbanization, the
increase is not immediately reflected in the property tax base
because of the statutory cyclical general revision of property
values, which is every 3 years.
Seminar-Workshop on Updating Local Revenue Code

(Cont.)

To provide therefore adequate public services to the

urban sector, it becomes imperative to close the fiscal
gap. To do this:
more money should flow into LGUs
service delivery must be made more efficient or
innovative so that some money may be saved and put
into the LGU coffers.
Some policy makers say that to sustain a given level of
service, LGU expenditures have to increase at a rate that
is at least proportional to the rate of population growth.
Thus while population growth, urbanization and the
associated growth in per capita income all tend to expand
the revenue generating capacity of LGUs, the growth in
local revenue may not automatically expand since it is
held back by the LGUs limited taxing authority and
lagging tax efforts.
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Financially Strong LGUs vs.

Financially Weak LGUs
Once the results from the application of the
indicators and benchmarks have been derived,
the identification of the financially weak LGUs
can then be done. Financially weak LGUs are
those that:

fail one-third (at least four) or more of the

benchmarks indicated; and
incur a cash deficit in its regular operations

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Caveat
benchmarks may only be applied to LGUs
individually

LGU sorting or classification must be

undertaken in order to compare the
benchmarks across LGUs

by income class
by political level (i.e. provinces, cities or municipalities)
by level of internal revenue allotments

look for common ground by which assessment

can be made more meaningful, otherwise,
individual LGUs are better assessed relative to
their own internally established goals

Seminar-Workshop on Updating Local Revenue Code