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Improving the Financial Management of Local Economic Enterprises

Author

Listed:
  • Rosario G. Manasan

    (Philippine Institute for Development Studies)

  • Cynthia G. Castel

Abstract

Although LEEs are meant to be self-sustaining, if not revenue-generating units, many of them actually incur losses on a continuing basis. Current practice in many LGUs does not engender a clear appreciation of the true cost of the local economic enterprise. COA has documented many cases where the operation of LGU economic enterprises was not treated as special accounts in the General Fund contrary to the provisions of the Local Government Code (LGC) of 1991. The less than transparent reporting of the actual financial condition and profitability of these enterprises may have some adverse effect on decisions taken by LGU officials. On the one hand, economic enterprises are oftentimes used as the vehicle for charging casual employees who are utilized elsewhere in the LGU system so as to circumvent the 45%-55% limitations on personal services (PS) expenditures of LGUs. On the other hand, part of the cost of LEE operation and management is sometimes charged under other offices in the LGU. Overall, the less than business-like approach to local enterprise management has resulted in large arrearages and low collection efficiency.

Suggested Citation

  • Rosario G. Manasan & Cynthia G. Castel, 2010. "Improving the Financial Management of Local Economic Enterprises," Governance Working Papers 23104, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:govern:23104
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    References listed on IDEAS

    as
    1. Shirley, Mary & Walsh, Patrick, 2000. "Public versus private ownership : the current state of the debate," Policy Research Working Paper Series 2420, The World Bank.
    2. Ha-Joon Chang, 2007. "State-Owned Enterprise Reform," Policy Notes 4, United Nations, Department of Economics and Social Affairs.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    economic enterprise; state-owned enterprise; public enterprise; alternative service delivery modes; government budgeting; one-fund principle; cost recovery;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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