More than three decades after the country embarked on a devolution agenda, a new Philippine Institute for Development Studies (PIDS) study raised critical issues in local government spending, particularly in light of the 2019 Mandanas ruling.

According to PIDS, the Madanas ruling, which substantially raised the fiscal autonomy of Local Government Units (LGUs), brought to the forefront the challenges LGUs face in managing their financial resources effectively.

The study, titled "An Assessment of the Local Government Units' Functional Assignments under a Decentralized Regime," revealed that despite the increased funding, LGUs often struggle to align their spending with devolved functions.

PIDS said this misalignment is largely due to the practice of "cross-charging," where budgets for various projects are spread across different offices.

This practice, while offering flexibility, obscures spending and undermines accountability, PIDS said.

"One key issue identified is the practice of 'cross-charging' in LGU expenditure accounts, where spending for various projects, programs, and activities is spread across different offices," the study stated. This creates problems in "clearly linking spending to specific devolved functions and services."

The study found that a substantial portion of LGU expenditures is allocated to administrative offices, such as the Governor's and Mayor's Offices, rather than to critical sectors like health, agriculture, and infrastructure.

PIDS expressed concern that the additional Mandanas ruling funds are not effectively improving essential citizen services.

The researchers also identified a trend of underspending by LGUs.

Despite the increased resources, PIDS noted that LGUs often fail to fully utilize their allocated budgets due to poor planning, insufficient monitoring, and neglecting crucial development projects.

"The downward trends, especially the sharp declines starting around 2014, mirror the issues of not fully using available resources," the study stated.

This ongoing challenge highlighted the need for LGUs to improve their planning and evaluation processes to ensure the effective utilization of financial resources, PIDS said.

The study's findings have significant implications for the Philippines' devolution agenda. It underscored the importance of addressing the challenges LGUs face in managing their fiscal responsibilities.

For this reason, the PIDs researchers recommended a reevaluation of the current system, including the national tax allocation formula, to address fiscal gaps and ensure that LGUs have the necessary resources to fulfill their devolved functions.

Furthermore, the study emphasized the need for enhanced capacity building at both the national and local levels. This includes improving monitoring to increase LGU compliance with development plans and providing LGUs with the technical expertise to effectively allocate resources and deliver essential services.

The study also proposed a strategic role for provinces as coordinators and providers of incentives for improved LGU performance.

This can help mitigate issues stemming from the fragmentation of LGUs and promote more efficient local public administration and service provision, PIDS said.