1

The first part of the revised Budget

Operations Manual for Local Government
Units (LGUs) advocates the principle of
participative governance, specifically in the
budget process. It attempts to persuade local
thinking on the benefits of allowing Non-
Government Organizations (NGOs), civil
society groups, and the private sector in
collective decision-making. Parallel with
participative budgeting is the relevance of
connecting the plan to the budget. Planning-
budgeting linkage promotes continuity,
transparency, and accountability in fiscal
management. If practised locally, it will
give meaning and importance to planning as
a function that should precede the budget.

PART I. ADVOCACIES ON PARTICIPATIVE
BUDGETING AND PLAN-BUDGET
LINKAGE




































2


Chapter 1. Participative Budgeting in Local
Governance


1.0 Introduction

2.0 Legal Basis of Participative Budgeting

3.0 Sustainable Human Development and Good Governance
3.1 Good Governance: the New Approach
3.2 Basic Principles of Good Governance

4.0 Guidelines on Participative Budgeting

5.0 Benefits of Participative Governance in the Budget Process

6.0 Identification of Stakeholders

7.0 Role of Stakeholders in the Budget Process

8.0 Elements of Quality Participation

9.0 Best Practices in Participative Budgeting













3
The participation of the private sector in local governance, particularly
in the delivery of basic services, shall be encouraged to ensure the
viability of local autonomy as an alternative strategy for sustainable
development (Section 3 [1], R.A. No. 7160).

Local government units shall promote the establishment and operation
of peoples and non-governmental organizations to become active
partners in the pursuit of local autonomy (Section 34, R.A. No. 7160)

Participative Budgeting in Local Governance

1.0 Introduction

The first chapter of the Manual introduces the user to the general
guidelines and concepts of good governance as advocated by the United
Nations Development Program (UNDP). The specific process in the
application of participative budgeting is laid down step by step as part of
the LGU-wide initiative to make fiscal administration in LGUs more
transparent.


2.0 Legal Basis























Figure 1. Why Participation is Necessary


3.0 Sustainable Human Development and Good Governance

Sustainable human development is the new approach to local
development. This approach depends on good governance, and the
empowerment and participation of individuals and communities in

Empowerment
Commitment

4
decisions that affect their lives and the well-being of their communities.
LGUs are encouraged to adopt the new approach.

3.1 Good Governance: the New Approach

3.1.1 Good governance is the exercise of economic, political and
administrative authority to manage local government affairs.
It comprises the mechanism, processes and institutions
through which citizens and groups articulate their interests,
exercise their legal rights, meet their obligations and
mediate their differences. (UNDP Policy Paper on
Governance).

3.1.2 Good governance is being close to the people as in a
democratic government of the people, by the people and
for the people. Its bedrock is the Rule of Law and Justice
rather than that of mans whims or caprices.

3.1.3 Good governance enables and empowers people to
participate more directly in decision-making processes that
respond to their needs. It involves civil society organizations
and the private sector as partners in local development. It
makes development more sustainable as people can claim
ownership of it.

3.1.4 Good governance demands efficiency in public
management. It emphasizes high standards of integrity and
identified needs, and continuous quality capacity-building
activities to formulate goals, policies, strategies and
processes that capture consensus and support from
stakeholders.

3.1.5 Consensus and effective participation, allow community-
driven local development in which people can have direct
control over key project decisions, including management of
investment funds.

3.1.6 The harmonization of local planning, investment
programming, revenue administration, budgeting and
expenditures management institutionalized under DBM-
NEDA-DILG-DOF Joint Memorandum Circular (JMC) No.
1, Series of 2007 (March 8, 2007) reduces the number of
plans prepared by LGUs to be provided with budgetary
5
allocations and integrates strategic responses to local issues
through collective decision-making which is in keeping with
good governance.

3.1.7 Through the participative process, planning and budgeting
linkage is institutionalized in LGUs. This linkage is
provided through the harmonized concept of the Annual
Investment Program (AIP) as clarified under the
aforementioned JMC.

3.2 Basic Principles of Good Governance

Some basic principles of good governance:

3.2.1 Respect for human rights,
including the rights of women
and children;

3.2.2 Respect for the rule of law,
political openness, participation
and tolerance;

3.2.3 Accountability and transparency;
and

3.2.4 Administrative and bureaucratic
capacity and efficiency.


4.0 Guidelines on Participative Budgeting

4.1 LGUs shall allow and practise genuine participation of people in
the planning and budgeting processes to promote and establish
transparency and accountability in all their fiscal transactions.

4.2 LGUs shall expand participation and involvement of people in
Local Development Councils (LDC) and Local Finance
Committees (LFC) in the sharing of ideas, information, and
experiences in setting directions and allocating available resources.
The purpose is to draw concerned citizens together to participate in
decision-making.

6


4.3 LGUs shall apply democratic principles in group decision-making
techniques in arriving at choices and preferences that are genuinely
responsive to peoples needs, especially to those of the
marginalized and disadvantaged segments of society:

Decision 1. Priority development issues that need to be
resolved
Decision 2. Vision and goal to be achieved
Decision 3. Objectives, policies, and strategies that will lead
to the goal
Decision 4. Specific PPAs to be implemented
Decision 5. Projects and activities to be prioritized
Decision 6. Available resources to be used

4.4 LGUs shall embody decisions arrived at in the plan and budget as
products of broad-based consultation and participation that
engender peoples collective consensus, commitment, and
ownership.

4.5 LGUs are encouraged to enhance participative planning and
budgeting in different venues:








Digital Governance


Formal Institutions
Local Development Council (LDC)
Local School Board (LSB)
Local Health Board (LHB)

Workshops

Figure 2. How Decisions in Planning and Budgeting are Made

4.6 LGUs shall establish priorities and allocate resources during
investment programming of PPAs as major links to budgeting.
The ranked PPAs and their corresponding resource requirements
7
become the bases for preparing annual budget proposals. The
expected results in each phase of the budget process are shown in
the table below to indicate the relevance of participation and
involvement of stakeholders in local government budgeting.


Table 1. Expected Results of the Budget Process

Budget Process

Expected Results


Projections
of Income
and Expenditures
and Establishment
of Priorities


Income and Expenditure levels
Ranked Development PPAs


AIP Preparation


Approved AIP for the Budget Year
by the Local Sanggunian


Budget Preparation


Executive Budget

Budget
Authorization


Approved Appropriation Ordinance

Budget Review


Review action

Budget Execution


PPAs Implemented and Major Final
Outputs Produced/Delivered


Budget
Accountability


LGU Performance Measured



8
5.0 Benefits of Participative Governance in the Budget Process

LGUs are encouraged to allow stakeholders to participate in the budget
process because of the benefits arising from their involvement:


Service gaps due to fund or resource
constraints may be addressed by the
private sector or civil society groups.



Delays in project implementation are
most often caused by conflicts arising
from concerned groups who were not
involved in the formulation of the project.


Bringing the government closer to the
people enhances partnership in all
government undertakings.


People who have ownership of the plan
are committed to its effective
implementation until completion even
when there is a change in leadership.


The vigilance of stakeholders in
monitoring the status of approved PPAs
from the authorization, review, execution
and accountability phases of the budget
will ensure the successful delivery of
goods and services to target clients.


6.0 Identification of Stakeholders

Decisions involving sources of financing, defining priorities in the use of
funds and arriving at a rational allocation of scarce resources call for
stakeholders who can share ideas and information on sound fiscal
administration. Stakeholders may come from either within or outside the
LGU.
Helps the LGU
maximize the use
of resources
Reduces delay
in the
implementation
of urgent projects
Develops trust
in government
Ensures continuity
and sustainability
of plans and
budgets
Ensures
the integration
and implementation
of the approved
AIP
9

Internal stakeholders like department heads, planning and budgeting staff,
LDC, and the Sanggunian may be invited through formal invitation or
internal memorandum to all staff to participate in the consultation
process.

External stakeholders may include representatives from NGOs and from
national line agencies assigned in the area; community leaders; members
of the academe, the private/business sector, and the basic sectors such as
women, farmers, fishermen, senior citizens, differently-abled persons and
other disadvantaged groups. Such stakeholders may be invited via print
media, radio/TV broadcast, or formal invitation-letters.

The participation of stakeholders may be engaged in all phases of the
budget process.













7.0 Role of Stakeholders in the Budget Process




Step 1 Stakeholders, such as civil society groups, NGOs, the private
sector, etc. as observers of the LFC, shall represent the
aggregate needs of the people, particularly the weak and the
disadvantaged. These observers may provide relevant inputs
to the LFC and the LCE in the formulation of policy
decisions that are embodied in the AIP.

Step 2 Stakeholders may also provide inputs to department heads of
line agencies that could help these decision makers in the
accurate determination of targets or in the identification of
beneficiaries in the delivery of agency services.

Budget Preparation
10



Step 3 Stakeholders may participate in the Sanggunian deliberation
of the Executive Budget during public or committee hearings
and consultation with specific sector groups affected by the
budget.

Step 4 Stakeholders may clarify or ask questions on changes in the
executive budget not found in the approved AIP.



Step 5 Stakeholders may relay information to the reviewing
authority on the consistency or inconsistency of the budget
with the AIP.



Step 6 Stakeholders may assist implementors in advocating the
benefits of the PPAs to prospective clients.

Step 7 Stakeholders may also assist the LGU in providing for the
service gaps due to fund constraint.

Step 8 Stakeholders shall see to it that the standards of service
delivery, in terms of quality and proper specifications, are
observed by the LGU.



Step 9 Stakeholders shall serve as monitors during PPA
implementation to ensure that services and goods are
properly delivered to target beneficiaries.


8.0 Elements of Quality Participation

In participative budgeting, it is important that LGUs shall give premium
to the quality of participation.

The consultation process shall have the following elements to ensure
quality participation of stakeholders.
Budget Authorization
Budget Execution
Budget Review
Budget Accountability
11

8.1 Skilled Facilitators

There must be a facilitator or group of facilitators skilled in the
application of the Technology of Participation (ToP). Facilitators
from within the LGU may be trained to use the ToP tool to elicit
effective participation from the stakeholders.

ToP is a unique method of facilitation that helps groups think, talk
and work together and provides group facilitators with structured
methods that recognize and honor contributions of all, let a group
deal with more data in less time, pool individual contributions into
larger more informative matters, and welcome diversity while
minimizing polarization and conflict.

ToP covers three methods of facilitation developed by the Institute
of Cultural Affairs (ICA), a US-based organization long involved
in organizing works in marginalized communities. These methods
include (a) the Focused Group Discussion Method (b) Consensus
Workshop Method, and (c) the Action Planning Method.*

8.2 Consciousness of Issues

Stakeholders are not only aware of the issues to be discussed, but
are also willing to share ideas and information in an atmosphere of
mutual respect and cordial relationship.

8.3 Focus on Issue

All discussions shall be guided by a focus question, or issue, to be
resolved. At the end of the day, every stakeholder is satisfied with
the collective decision made by the group on how the issue will be
resolved.

8.4 Persons of Authority as Resource Persons

The LFC members shall be the resource persons during the
consultation process. As stakeholders themselves, they shall be
ready to share all the plan-budget information necessary to arrive at
good decisions.


_____________
*Barcillano, Malu C., Ph.D. The Technology of Participation (ToP) and its Application
12

9.0 Best Practices in Participative Budgeting


Local Resource Management and Fiscal Sustainability: The Case of Naga City
1


The Naga City case illustrates effective fiscal and financial management strategies
which are anchored on a governance framework that involves strong and active multi -
stakeholder participation in urban governance. Naga Citys strategy is built on the
philosophy that economic growth and improvement in the lives of the people should go hand
in hand and that good governance is the trigger. By capitalizing on three key factors, namely,
its progressive development perspective, functional partnerships with stakeholders, and
people participation, Naga City has built on individual and institutional capabilities and
mainstreamed their roles in local development. The city government adopted productivity
and service excellence programs to reorient its personnel to business and customer service
orientation and foster efficient and quality service for its constituents.

One important innovation made by Naga City was the codification in 2004 of its
Revenue Code, compiling and effectively revising tax-related ordinances dating back to
1975. Majority of business tax rates and user fees were reconsidered and the presumptive
income approach to business taxation was adopted under the Code. On real property
taxation, the city government remains conservative in increasing its assessment levels and tax
rates. However, market values of properties have soared, indicating economic progress as
evidenced by the influx of investments and business activities. The citys adoption of the
Investment Code in 1997 may also have contributed to the influx of investments.

Computerization has been an important support mechanism to the citys efforts to
foster transparency, efficiency, and effective governance. Its computerization efforts such as
the i-Governance and city website, GIS, SMS-facilitated reporting mechanism, i-Serve
project have helped to improve local resource generation and quality of government service.

By mobilizing all factors in city governance towards attracting investments and
buoying up business activities, Naga City has generated local income without the necessity of
putting too much tax burden on its constituencies. For the past ten years (1996-2005), tax
revenues, specifically business taxes, have been the major income generator of the City.
Consistent with the adopted governance framework, the city government has also observed
prudent utilization of government resources through its doing more with less approach and
a budget programming strategy which is aligned to the Citys vision and mission.










1
Perla A. Segovia with Nino B. Alvina, Local Resource Management and Fiscal Sustainability: The Case of
Naga City. Sourcebook 4, Selected Case Studies on Strengthening Local Government Resource Management.
Small Projects Facility, European Commission-Philippines Partnership.
13

Mandaluyong Citys Marketplace: A Joint Venture with the Private Sector
2


Background of the Project

A public market is the most common local enterprise operated by local government
units (LGUs), particularly cities and municipalities in the Philippines. The number and size
of the public market of a city or municipality is an indicator of its level of economic
development as many economic activities are carried out in this facility. All cities have one
or more public markets but not in the case of municipalities. Lower-income class
municipalities, for instance, do not own a public market facility.

The operation of a public market is also considered a public service. Thus, Philippine
cities and municipalities are mandated by the 1991 Local Government Code (Sec 17) to
provide this basic facility and service.

Mandaluyong City faced the problem of providing a new infrastructure facility when
its public market was gutted by fire in August 1990. Confronted with the necessity and
urgency to provide this facility/service to his constituents and constrained financially to
construct a new market, Mayor Benjamin Abalos, the Citys local chief executive, decided to
implement stopgap measures while mulling over what would best address the problem. He
studied all options that could be done. Meantime, temporary stalls for vendors were
constructed along the sidewalks of the street perpendicular to the burned market. Stalls were
also built in one part of a city park.

This measure brought about untold inconvenience to the public. It created traffic
congestion as market goers and commuters alike milled along the busy street. Market goers
also complained about the inconvenience of going to a street market especially during the
rainy days. Since only the stalls had roofs, only the vendors were protected from the
elements. Such set up also created health and sanitation problems. As a result, numerous
complaints from residents and offices along that street were a daily fare for the city
government. This situation continued for more than a year.

The city government was under tremendous pressure from the vendors and other
constituents to build a new market. The Mayor, in consultation with the City Council,
decided to construct a multi-storey shopping mall cum market. This decision was premised
on certain considerations. One was the strong desire of the Mayor for the city to have a
shopping mall or commercial complex of its own. Two, he knew very well that the place
where the mall would be built is strategically located as it is along a major artery of the city.
Three, he was convinced that a project confined to the construction of a public market project
(i.e. without the commercial complex component) would not attract private sector investors
because of the high risk involved. It was likely that it would take a long period of time (more
than 10 years) for the investor to recover the investment. The revenue stream expect ed from
the operation of the market would not be very substantial since the city government could not
rely on increasing stall rentals as such cost increases would surely be passed on by the
vendors to the buying public.

Tapping the Private Sector Through the Build-Operate-Transfer Scheme

The Mayors dream for the city to own a shopping mall seemed to many to be an
impossibility because the city government did not have the financial means to fund a capital -
14

intensive infrastructure project. Where to get the funding for the construction of a
commercial complex was a primary problem. The city government ruled out taking a huge
long-term loan from commercial banks because a significant portion of city funds would be
tied up to yearly loan amortizations rather than being used to support other basic services of
the city.

The strong political will of the Mayor to pursue his dream for his city propelled him
to go for a Build-Operate-Transfer (BOT) scheme. At that time, the Philippine Congress had
just passed the BOT law and there were no implementing rules and regulations that could be
used by the city government as a guide. Even government agencies like the Commission on
Audit and the Department of Finance were at that time clueless about how to help the city
government implement a BOT programme.

Nonetheless, this did not deter the city government from pursuing its dream. The
Mayor scouted for developers, investors, and businessmen who might be interested in the
BOT project. The invitation to pre-qualify for the BOT project was advertised in major
newspapers for several weeks in May 1991. It called for the construction of a seven-storey
building.

Identifying the Right Private Sector Partner

Two conferences with interested parties/investors were held in 1991, one year after
the burning of the public market. Thirteen interested developers and investors attended the
first conference. The concept of BOT was explained to them. They were made to understand
that they have to shoulder all the costs in the construction of the commercial mall and that
ownership of the facility would have to be turned over to the city government upon
completion of its construction. Subsequently, another conference was held. This time only
five of the 13 attended. The eight others backed out immediately after the first conference.
When the bidding for pre-qualification was finally held, the number of interested parties
dwindled to two. One of them, the Market Realty Development and Credit Funders
Corporation won the bid. To further expand its capitalization, this business entity merged
with nine other firms forming a business consortium with the name Macro Funders and
Developers Incorporated (MFD). It was formed purposely for the BOT project. The Mayor
was instrumental in the formation of this group and it was he who enlisted the help of his
friends in the private sector to form the consortium (Interview with Atty. Ernesto Santos,
March 20, 2002).

The contract for the development, financing, construction and operation of the
commercial center was awarded on August 29, 1991, one year after the burning of the old
public market. The total cost was P377,468,932 (or US$ 12.5M). When the project was fully
completed, the cost was almost P600M or (US$ 24.6M).

Negotiating with the Private Sector Partner

The cooperation of the private sector in financing this capital-intensive piece of urban
infrastructure was made possible through the negotiation skills of the city government headed
by the Mayor himself. The Mayor was assisted by the citys Administrator not just in the
conceptualization of the project but throughout its implementation. According to the former
administrator of the city government, there were actually no demands made by MFD, the
private partner. It was, in fact, the city government itself that offered the private partner a
15

two-year moratorium from payment of mayors permit and building permits (Interview with
Atty. Ernesto Santos, March 25, 2002). This strategy would enable the private partner to
attract business establishments to locate in the commercial complex. The city government
also contracted the services of MFD to provide maintenance and security of the public market
located on the ground floor of the commercial complex. For five years, it was MFD which
maintained and secured the public market.

Problems Encountered

Engaging the participation of the private sector in the provision of a public facility
and service that requires enormous capital outlays was not an easy task for the city
government of Mandaluyong. The major problems it encountered were the following:

Getting the trust and confidence of the private sector. This was the most
significant problem. It took the city government more than six months to
convince a private contractor to enter into a joint venture where the city would
provide the land and the private contractor to provide the capital and expertise in
the construction and management of the BOT project.

Difficulty on the part of the private contractor to obtain loans from the
commercial banks. The MFD, the business consortium, could not use the land
where the infrastructure was to be built as collateral because it was owned by the
city government. By obtaining loans from commercial banks on an individual
basis, the business consortium remedied the problem. This meant that each
member of the consortium was able to obtain a loan on its individual financial
capacity to pay. (Interview with Atty. Eusebio Santos, March 20, 2002).

Much paperwork entailed by the BOT. This was a secondary problem
encountered in the BOT project in connection with the reports on technical and
economic data requirements prepared for the pre-qualification and bidding
process. The paper work was taxing on the part of the city government and
represented a hidden cost to the project.

Benefits of the Partnership

The beauty of this BOT project is that it provided mutual benefits for the public and
private sector partners. The joint project could not have been successful if only one party
received benefits from it.

Benefits for the City Government

The BOT scheme allowed the city government to develop and own the needed
urban infrastructure without incurring a substantial financial burden. It was the
private sector partner that provided the funds for the project. The city government
was thus freed from paying loan amortizations, which fund could be utilized for
other development projects and services.

Conservative estimates of around P10M-P20M revenues per annum from the
public market and business establishments in the commercial complex are now
16
accruing to the city government coffers. This additional income is plowed back to
city coffers for the improvement of city government services.

A new commercial district was developed. The increased activity in the area led
to the appreciation of land value in its vicinity. Before the construction of the
complex, the land in the area cost P8,000 per square meter. At present, it costs
P28,000 to P30,000 per square meter. This can be translated into higher real
property taxes for the city government.

Benefits for the Private Sector Partner

The terms of the contract between the local government and the private sector
developer allowed the latter to benefit from the project in the following ways:

The MFD is now earning revenues from the operation of the numerous business
establishments in the commercial complex. It was given the right to operate the
complex for 40 years with the option for renewal. At present, the commercial
complex registers 95 percent occupancy. Technically, the MFD is a lessee of the
commercial complex since ownership belongs to the city government. However,
it is not paying rent to enable it to recoup its investment. According to the Vice-
President of the firm who used to be the Administrator of the city government, the
firm, which is now on its seventh year of operating the complex, has almost
recovered its investment. Ninety-percent (90 percent) of its loans have already
been paid (Interview with Catty. Ernesto Santos, March 25, 2002).

It is also exempted from paying real property taxes (around P10M annually) since
it is the city government that owns the lot and the edifice.

Other Socio-Economic Benefits

External to both the local government unit and its private partner are other benefits
brought about by the joint venture.

The commercial complex not only services the city population of Mandaluyong
but also around 10 percent of the population of its neighboring LGUs like San
Juan, Sta. Ana, and Sta. Mesa, Manila.

The commercial complex provides for a public market with all the facilities and
amenities of a modern public market operated under the most convenient,
sanitary, and secure conditions.

The market is controlled and supervised exclusively by the city government. The
rental rates are fixed by the city government to guarantee that the goods are sold at
the lowest possible prices and within the reach of low-income groups.

The building of the commercial complex cum market generated employment.
More than 1,000 laborers are employed there to date.

The perennial traffic problem in the area was solved. The commercial complex
provided for a two-level parking facility. Flooding, pollution, and garbage
17

problems were likewise solved by providing for a centralized collection and
spillway and wastewater and pollution control systems integrated into the project.


Lessons Learned

As can be gleaned from the case presented, several lessons illustrating the success of
the partnership can be drawn:

The strong political will of a public sector leader to pursue the PPP through BOT
made a lot of difference. Undeniably, Mayor Abalos of Mandaluyong City played
a crucial role in the realization of the BOT project. He left no stone unturned
when wooing the private sector into a joint venture. He was able to convince his
friends in the business community about the importance and value of the project

The city government and its private sector partner shared the risks of the project.
The former offered concessions to the latter to compensate for project risks (like
cost overruns) it bore. For instance, a two-year moratorium from payment of
some taxes (Mayors permit, building permit) was offered to the investor.
Moreover, the city government does not share in the revenues from the operation
of the commercial complex. Since the city government operates the public
market, it bears the risk of having all stall collections fall below the operating cost
of the public market. In effect, the project risks were borne by both parties.

The city government recognized the need for flexibility in project packaging. It
allowed the private investor to repackage the public market to make it financially
attractive.

The presence of at least one component authority that provided support to the
Mayor in all negotiations contributed to the success of the project. Mayor Abalos
utilized his Administrator, both a certified public accountant and a lawyer, in
negotiations with the private partner. The local governments Administrator
played a key role since it was he who saw to it that the details of the agreements
between the two parties were carried out.

In conclusion, the partnership of the city government and the public sector investor
succeeded because the joint venture was beneficial to both parties. The BOT case of
Mandaluyong City is a concrete example of a win-win project.








2
Alicia B. Celestino, Public-Private Sector Partnership for Urban Infrastructure: The Build-Operate-Transfer
Program of Mandaluyong City. Sourcebook 1, Perspective and Approaches in Local Government Resource
Management. Small Projects Facility, European Commission-Philippines Partnership.
18

Chapter 2. Plan - Budget Linkage


1.0 Introduction

2.0 Legal Basis of Plan-Budget Linkage

3.0 Harmonizing Plans with the Budget
3.1 Development Plan for Provinces and Highly-Urbanized
Cities
3.2 Development Plan for Cities and Municipalities
3.3 Local Development Investment Program
3.4 Annual Investment Program
3.5 Policy Guides on a Plan-Budget Linkage
3.6 Synchronizing the Plan-Budget Calendar
4.0 The Plan-Budget Cycle

5.0 AIP Preparation
5.1 Key Players in AIP Preparation
5.2 The AIP Process Flow Chart
5.3 Guidelines on AIP Preparation

6.0 The PPA Structure
6.1 What is a PPA Structure?
6.2 Samples of a PPA Structure
6.3 Review of Existing PPA Structure
6.4 Redesigning of Current PPA Structure
6.5 PPA Performance

7.0 Reforms in Local Government Budgeting
7.1 Public Expenditure Management (PEM) Reforms
Medium Term Expenditure Framework (MTEF)
Organizational Performance Indicator Framework (OPIF)
OPIF Process
Formulation of Major Final Output (MFO)
Identification of PPAs
Performance Indicators (PIs)
Suggested Steps in Determining PIs
Sample Illustration of Department/Office Logical
Framework




19
Local budget plans and goals shall, as far as practicable, be harmonized
with national development plans, goals and strategies in order to
optimize the utilization of resources and to avoid duplication in the use
of fiscal and physical resources (Section 305 [h], R.A. No. 7160).

Local budgets shall operationalize approved local development plans
(Section 305 [i], R.A. No. 7160).

Local governments shall formulate sound financial plans, and the local
budgets shall be based on functions, projects and activities in terms of
expected results (Section 305 [g], R.A. No. 7160).

Budgets of LGUs shall include a brief description of the functions,
projects and activities for the ensuing fiscal year; expected results for
each function, project and activity; and the nature of work to be
performed, including the objects of expenditure for each function,
project and activity (Section 317 [b] [3], R.A. No. 7160).
Plan-Budget Linkage

1.0 Introduction

This chapter discusses the general concepts and procedural guidelines on
how local plans are linked to the budget that should harmonize with
national development goals and objectives. It provides specific
guideposts in the application of the Annual Investment Program (AIP) as
a tool that connects the plan to the budget; introduces the program-
project-activity (PPA) structure, Major Final Output (MFO) and
Performance Indicators as new budget tools in local government
budgeting; and finally it outlines the plan-budget linkage through a
synchronized local planning and budgeting calendar.


2.0 Legal Basis













3.0 Harmonizing Plans with the Budget

The purpose of harmonizing local plans with budgets is clearly provided
in DBM-NEDA-DILG-DOF JMC No. 1, Series of 2007 dated 08 March
2007. It will set a common direction in the implementation and
achievement of local endeavors in harmony with national development
20
goals and objectives. It will strengthen the interface and complementation
between LGUs, national government agencies (NGAs), among all LGUs
in all levels (vertically and horizontally), and funding institutions and
donor agencies in the planning, investment programming, budgeting and
expenditure management, and revenue administration.

The harmonization of local plans with national development goals is
essential in achieving efficiency and effectiveness in the allocation of
resources. It starts with the preparation of a development plan at least for
6 years for provinces.

3.1 Development Plan for Provinces and Highly-Urbanized Cities

The Provincial Development and Physical Framework Plan
(PDPFP) is a six-year plan that merges the traditionally separate
provincial physical framework plan and provincial development
plan to address the disconnection between spatial and sectoral
factors and between medium-and long-term concerns. The PDPFP
contains the long-term vision of the province, and identifies
development goals, strategies, objectives/targets and corresponding
PPAs which serve as primary inputs to provincial investment
programming and subsequent budgeting and plan implementation
(DBM-NEDA-DILG-DOF JMC No. 1, Series of 2007).

3.2 Development Plan for Cities and Municipalities

The long-term development plan for cities and municipalities is
called the Comprehensive Development Plan (CDP). The CDP is
a multi-sectoral plan formulated at the city/municipal level
embodying the vision, sectoral goals, objectives, development
strategies, and policies within the term of LGU officials and the
medium-term. It contains corresponding PPAs which serve as
primary inputs to investment programming and subsequent
budgeting and implementation of projects for the growth and
development of local government territories (DBM-NEDA-DILG-
DOF JMC No. 1, Series of 2007).

3.3 Local Development Investment Program

Section 305 (i) of R.A. No. 7160 explicitly provides that local
budgets shall operationalize approved local development plans.
This implies that the preparation of local plans shall precede the
preparation of local budgets. On the basis, therefore, of the
21
approved PDPFP for provinces and CDP for cities and
municipalities, a programming document called the Local
Development Investment Program (LDIP) shall be prepared.
Investment programming covers 3 to 6 years. The LDIP at the
provincial level is a six-year rolling program coinciding with the
time frame of the PDPFP.

The LDIP is a basic document linking the local plan to the budget.
It contains a prioritized list of PPAs which are derived from the
CDP in the case of cities and municipalities, and the PDPFP in the
case of the provinces, matched with financing resources, and to be
implemented annually within a three to six-year period. The first
three (3) years of the LDIP shall be firmed up along with the
priorities of the incumbent LCEs (DBM-NEDA-DILG-DOF JMC
No. 1, Series of 2007).

3.4 Annual Investment Program

Another document to be submitted by the LDC to the LFC as
mandated under Article 410 of the IRR of R.A. No. 7160 is the AIP
prepared and approved during the fiscal year before budget
preparation.

The AIP refers to the annual slice of the LDIP which constitutes the
total resource requirements for all PPAs, consisting of the annual
capital expenditure and regular operating requirements of the LGU.

The AIP, therefore, is the yearly program of expenditures both for
capital and current operating requirements of the LGU that will
serve as basis for the preparation of Annual and Supplemental
Budgets. As a document reflecting the total resource requirements
for the year, the AIP is a document that reinforces plan-budget
linkage.










22

The plan-budget linkage is shown in the following diagram:




































Figure 3. Plan-Budget Link Model





L
L
D
D
I
I
P
P


L LI IN NK K
D DE EV VE EL LO OP PM ME EN NT T
P PL LA AN NN NI IN NG G
( (6 6- -1 15 5 Y Ye ea ar rs s) )
( (3 3- -6 6 Y Ye ea ar rs s) )




I IN NV VE ES ST TM ME EN NT T
P PR RO OG GR RA AM MM MI IN NG G



( (1 1 Y Ye ea ar r) )
B BU UD DG GE ET TI IN NG G
( (1 1 Y Ye ea ar r) )

A
A
I
I
P
P


P
P
D
D
P
P
F
F
P
P
/
/
C
C
D
D
P
P

A AN NN NU UA AL L B BU UD DG GE ET T
A AN ND D
S SU UP PP PL LE EM ME EN NT TA AL L
B BU UD DG GE ET T
P PL LA AN N
B BU UD DG GE ET T
23
3.5 Policy Guides on a PlanBudget Linkage

3.5.1 Development planning shall not be limited to projects and
activities to be funded by the 20% Development Fund. The
entire annual/supplemental budgets shall be dedicated to
sustainable human development in order to achieve the twin
goals of eliminating poverty and promoting economic
growth. Development planning in general is medium-term
and for provinces, covers a six-year period rolling plan.

3.5.2 Local elective officials shall develop the capacity to
mobilize resources and ensure program sustainability. It is
their responsibility to develop the capabilities of their people
in the long-term so that the well-being of present and
future generations is not undermined.

3.5.3 Local budgets shall be policy-driven and performance
based. Policy formulation shall include:

Explicit policy directions to eliminate poverty and
unemployment; and

Policies on how the budget shall be financed in the
medium-term and how it shall be allocated among
priority PPAs in the short-term. The LFC shall
recommend to the LCE alternative sources of financing
the budget and a rational criteria for allocating available
resources.


3.6 Synchronizing the Plan-Budget Calendar

The budget calendar is presented separately for provinces and
highly-urbanized cities and for cities and municipalities for easy
execution of the plan-budget calendar as synchronized.








24
Table 2. SYNCHRONIZED LOCAL PLANNING-BUDGETING
CALENDAR

PERIOD
COVERED
ACTIVITY OUTPUT/S

ACTOR/S

January (First
Week)
PPDC sets guidelines for data
gathering
Guidelines for
data
Gathering
PPDCs
January to
March
Updating of planning and
budgeting
Database (socioeconomic,
physical resources, time series
revenue and expenditure data,
project profiles/ status, among
others)
Update planning,
Budgeting and
Financial database
LPDCs, budget
Officers,
Treasurers,
Department
Heads, NGAs/
RLAs
April-May Analysis of planning
environment for plan
preparation/review/updating
Draft situational
analysis and
assessment of plan
implementation
LPDCs, NGAs/
RLAs
April to May





June 1 to 15




Not later than
First Week of
August

Updating of appropriate AIP
in the LDIP as input to
budgeting



Preparation of the AIP using
the AIP Summary Form
(Annex A) for the budget
year

Approval of the AIP
Indicative AIP
(the first year of
the LDIP in the
case of election
year)

AIP Summary
Form



AIP for the Budget Year
LDCs, LPDCs





LPDCs, local
budget officers



Sanggunian


1
st
week of July
during election
year




Whole month of
July

PDPFP/CDP Preparation

Reconstitution of the LDC
based on initial guidelines,
including mechanism for
choosing private sector
representatives, prepared by
LPDC

Formulation of development
vision, goals, strategies,
objectives/targets and
identification of PPAs


Timetable and
tasking for plan
preparation/
updating



Vision, goals,
Strategies,
Objectives/Targets
and PPAs


LCEs






LDCs, LPDC,
Department
Heads,
NGAs/RLAs

25

PERIOD
COVERED
ACTIVITY OUTPUT/S

ACTOR/S


Harmonization and
complementation of
development vision, goals,
strategic direction between
and among province and
component
cities/municipalities

Approval of the PDPFP/CDP
Harmonized
vision, goals and
strategic direction





PDPFP/CDP
Jointly by the
province and
component
LGUs




Sanggunian


June to July 1-31
during election
year

LDIP Preparation

Identification of areas for
complementation of PPAs
between and among
provinces and their
component
cities/municipalities

Prioritization of PPAs


Matching of PPAs with
available financing resources
and determination of
additional revenue sources to
finance the PPAs

Approval of LDIP Prioritized
PPAs

LDIP, revenue generation
measures

Approved LDIP


Joint programs/
projects





Prioritized PPAs


LDIP, revenue
generation
measures









Approved LDIP


Provinces and
their component
cities and
municipalities,
NGAs/RLAs


LDC, LFC,
NGAs/RLAs

LDC, LFC,
NGAs/RLAs










Sanggunian


June 16 to 30 0r
1
st
week of July
during election
year
Budget Preparation

Issuance of Budget Call


Budget Call


LCEs of
Provinces, Cities,
Municipalities
July 1 -15

Submission to LCE of
detailed 3-year statement of
income and expenditures
Certified
statement of
income and
expenditures
Local Treasurers
(Province, Cities,
Municipalities)

26

PERIOD
COVERED
ACTIVITY OUTPUT/S

ACTOR/S


Preparation and submission
of budget proposals
Budget Proposals Local department
heads

July 16 August
31

Conduct to technical budget
hearings on budget proposals
submitted by Department
Heads

Reviewed budget
proposals

LFCs and LCEs

On or before the
15
th
day of
September

Submission to the Punong
Barangay of the estimated
Income and Expenditure for
the ensuing fiscal year

Certified
Statement of
Income and
Expenditure

Barangay
Treasurer


September 16 to
30

Consolidation of Budget
Proposals into the Local
Expenditure Program and
preparation of the BESF

LEP and BESF

LFC

Not later than
October 16

Preparation of the Budget
Message and Submission of
Executive Budget to the
Sanggunian

Budget Message
and Executive
Budget

LCEs (Provinces,
Cities,
Municipalities)

October 17
onwards

Enactment of the Annual
Budget of the ensuing fiscal
year by the Sanggunian
concerned

Enacted Annual
Budget

Sanggunian
(Provinces,
Cities,
Municipalities
and barangays)

Within three (3)
days from the
approval by the
LCE of the
annual
supplemental
budget

Submission of the Annual or
Supplemental Budgets of
Provinces, Cities and
Municipalities to appropriate
reviewing authority

Annual
Supplemental
Budget submitted
for review

Secretary to the
Sanggunian

Within ten (10)
days from the
approval by the
Punong
Barangay of the
Annual or
Supplemental
Budgets of
Barangays

Submission of the Annual or
Supplemental Budgets for
review


Annual or
Supplemental
Budgets submitted
for review


Sanggunian
27


PERIOD
COVERED
ACTIVITY OUTPUT/S

ACTOR/S


Within sixty (60)
days from receipt
of the submitted
Annual or
Supplemental
Budgets of
barangays for
review

Review of the Annual or
Supplemental Budgets of
Barangays


Reviewed Annual
or Supplemental
Budgets of
Barangays


Sangguniang
Panlungsod,
Sangguniang
Bayan, City or
Municipality
Budget Officers


Within ninety
(90) days from
the receipt of the
submitted
Annual or
Supplemental
Budgets for
review of
Provinces, Cities
and
Municipalities

Review of the Annual or
Supplemental Budgets of
Provinces, Cities and
Municipalities

Reviewed Annual
or Supplemental
Budgets of
Provinces, Cities
and Municipalities

DBM Regional
Offices,
Sangguniang
Panlalawigan

January 1 to
December 31

Implementation/Execution of
the Annual or Supplemental
Budgets

Annual of
Supplemental
Budgets

LCEs or
Provinces,
Cities
Municipalities
And Barangays


NOTE: Detailed activities will be provided through subsequent guidelines,
including cross-referencing to the technical guides/manuals such as
the RPS-CDP/ELA, PLPEM, UBOM and Revenue Administration.










28

4.0 The Plan-Budget Cycle

4.1 The planning-budgeting cycle is a continuous process of improving
and evolving a systematic and logical procedure of validating data
from the field to come up with an accurate database necessary for
selecting the best alternative choice in planning and decision-
making.

4.2 The plan needs to be linked to the budget. LGU plans and budgets
must see to it that development issues are clearly identified within
the context of improving general welfare and basic services
delivery. PPAs to be implemented must be consistent with the plan
objectives. They must determine the extent to which these
objectives can be achieved on the basis of available resources.

4.3 Flexibility in adjusting local plans and budgets with national goals
is an important ingredient in planning. However, the ability to
adjust to new programs coming from the national government must
be matched with the financial capacity and resource endowment of
LGUs.

4.4 LGUs shall determine what MFOs or goods and services will
impact on the long-term goals. They shall evaluate what goods and
services are within their capability to produce. Priority projects
and activities of LGUs whose funding/technical requirements are
beyond their capacity to implement may be proposed to a higher-
level LGU or to the NGA concerned or to civil society for possible
assistance.

4.5 The annual projected output or targets of PPAs to be implemented
during the budget year as reflected in the AIP shall be
synchronized with outputs of NGAs in the regions, provinces,
cities and municipalities to determine their synergy and impact on
society.

4.6 Lessons learned in the plan-budget execution shall be input data in
the next plan-budget cycle, shown in the following diagram.





29






























Figure 4. PlanBudget Cycle

5.0 AIP Preparation

5.1 Key Players

5.1.1 Local Development Council The LDC, through its
technical secretariat, the PPDO/CPDO/MPDO for provinces,
cities and municipalities respectively shall:

align development plan with current development issues;

cull out the current slice of the LDIP as input and annual
component of the Capital Expenditure (CapEx) into the
AIP Summary Form;
CURRENT
YEAR
(Jan.-June)
BUDGET
YEAR
(Jan.-Dec.)
CURRENT
YEAR
(July-Dec.)


BUDGET
ACCOUNTABILITY


DEVELOPMENT
PLANNING
(6-15 years)
INVESTMENT
PROGRAMMING
(3-5 years)


BUDGET
EXECUTION




BUDGET
REVIEW




BUDGET
AUTHORIZATION
ION



BUDGET
PREPARATION



AIP
(1 year)
30
determine resource requirements of PPAs for basic
services delivery; and

prepare draft AIP Summary Form and present to the LCE
for comment/review.

5.1.2 Local Planning and Development Coordinator The
LPDC shall input the annual component of the Capital
Expenditure (Capex) into the AIP Summary Form.

5.1.3 Local Budget Officer The LBO shall integrate the Capex
together with the PS, MOOE, and other CO into the total
resource AIP to be reflected in the AIP Summary Form.

5.1.4 Local Chief Executive The LCE shall present the AIP
Summary Form to LDC for deliberation and concurs with
the AIP Summary Form as agreed upon by the LDC.

5.1.5 Sanggunian The Sanggunian shall approve the AIP.

5.1.6 NGOs, Civil Society Groups and Other Stakeholders
NGOs, civil society groups and other stakeholders shall
serve as key informants on major development issues in the
LGU. They shall provide relevant information in the
identification and prioritization of PPAs for inclusion in the
AIP.

5.2 The AIP Process Flow Chart

As an annual slice of the LDIP, the AIP shall be updated by the
Planning and Development Coordinator or an LDIP committee
prior to the yearly budgeting exercise to take into account new
developments as well as to consider PPAs from the previous year
which were not implemented. The AIP is prepared jointly by the
LPDC who does consistency analysis of the priorities and
objectives for a particular year with the PPAs programmed for the
same year in its LDIP and the LBO who determines the expected
outputs and financial requirements of the PPAs, including source
of funds. This draft AIP is discussed with the LCE for comments
before they are finalized for deliberation by the LDC. Once
consensus is arrived at the LDC level, the AIP is endorsed to the
Local Sanggunian for approval and enactment.

31



LDC Local Chief Executive (LCE) / Local Sanggunian
PPDO/CPDO/MPDO/LBO Local Development Council (LDC


































Figure 5. The AIP Process Flow Chart




LDC Deliberates on/
Endorses AIP
to Local Sanggunian
Aligns Development
Plan/ELA (PDPFP/CDP)
with Current
Development Issues
Determines Annual
Resource Requirements
of Priority Development
Projects from LDIP
Funded from 20%
of IRA, General Fund
and Other Sources Funds
Determines Resource
Requirements of PPAs
for Basic Services
Delivery
and Administrative/
Legislative Services
Prepares Draft AIP
and present to LCE
for Review
LCE Presents AIP
to LDC
for Deliberation
Approves AIP
for the Budget Year
Updates AIP
to consider new
and
unimplemented PPAs
32
5.3 Guidelines on AIP Preparation

5.3.1 The AIP shall be categorized under general public, social,
economic and other services sector (Section 317 [a], R.A.
No. 7160). Pursuant to the New Government Accounting
System (NGAS) of the Commission on Audit, the services
falling under each of these basic sectors are as follows.

5.3.1.1 General Public Service Sector

Executive Services
Legislative Services
Planning and Development Coordination
Services
Budgeting Services
Treasury Services
Accounting Services
Administrative Service
Civil Registry Services
General Services
Assessment of Real Property Services
Auditing Services
Information Services
Legal Services
Prosecution Services
Administration of Justice Services
Land Registration Services
Mining Claim Registration Services
Police Services
Fire Protection Services
Repair Maintenance of Government Facilities

5.3.1.2 Social Services Sector

Education and Manpower Development
Public Education Services
Medical Subsidiary Services
Manpower Development Services
Sports Center, Athletic Field, and
Playground
Maintenance Services
Cultural Project Services
33
Cultural/Conference/Convention Center
Operation Services

Health
Health Services
Field Projects (Immigration, Inoculation,
Blood Donor Services)
Day Care Clinic
Hospital Services
Chest Clinic

Housing and Community Development
Housing Projects
Sanitary Services
Street Cleaning
Garbage Collection
Sewerage and Drainage
Street Lighting
Community Development Services

Social Welfare
Social Welfare Services
Family Planning Services
Miscellaneous and Other Social Services

5.3.1.3 Economic Services Sector

Agricultural Services
Veterinary Services
Natural Resources Services
Architectural Services
Engineering Services
Economic Enterprises and Public Utilities
Operation Services
Tourism Services

5.3.1.4 Other Services

Services that cannot be categorized in any of the
sectors identified above shall be under other
services.

34
5.3.2 The AIP Summary Form

The AIP Summary Form (Figure 6) is prescribed under DBM-
NEDA-DILG-DOF JMC No, 1, Series of 2007 (Annex A),
containing the following information:

5.3.2.1 AIP Reference Code (Column 1) - The AIP
Reference Code is vital to the Plan-Budget Linkage process.
The sectoral code classification is consistent with the
NGAS/sectoral coding of the Commission on Audit, with its
three (3) major sectors, including the five (5) sub-sectors
under social services.

SECTOR CODE
(Denoted by 4 digits)
General Public Services Sector 1000
Social Services Sector 3000
Sub-Sector
Education and Manpower Development 3000-100
Health, Nutrition and Population Control 3000- 200
Labor and Employment 3000- 300
Housing and Community Development 3000- 400
Social Security, Social Services and Welfare 3000-500
Economic Services Sector 8000
Other Services 9000

AIP Reference Coding

A sector is denoted by the first 4 digits 1000 to 9000
A program is denoted by a fifth digit in numerical order
1,2,3,4,5,6 as there are many programs in a particular
sector.
A Project/Activity is denoted by a sixth digit also in
numerical order 1,2,3,4,5 as there are many
projects/activities in a particular program.

Illustrative Example:

1000 1 1
Project/Activity - - Tax Mapping
Program - - - - - - - Real Property
Tax Administration
Sector - - - - - - - - General Public Services
35

5.3.2.2 Program/Project/Activity Description (Column 2)
- The PPA is a brief and concise description of the work to
be done in a particular sector which includes both the short
and long-term results of the program.

Example of PPAs under the Agricultural Services Program
Extension and On-Site Research Services
Demonstration/Farm Nurseries
Operation of Farm Equipment Pool
Quality Control of Agricultural Products
Construction of Small Irrigation System

5.3.2.3 Implementing Office/Department (Column 3) -
The Implementing Office/Department refers to the
Office/Department responsible for implementing the PPAs
and for delivering the services as mandated by the Local
Government Code of 1991. The implementing
Office/Department should be presented by sector.

5.3.2.4 Schedule of Implementation (Columns 4 and 5) -
The implementation schedule is categorized by PPAs: 1)
PPAs that are implemented regularly and 2) PPAs which
have specific time frames for the starting dates (month/year)
and completion dates (month/year).

Examples:

PPAs Implemented Regularly

Extension and On-site Research Services
- January 2009 to December 2009
Operation of Demonstration Farm
- January 2009 to December 2009

PPAs with a Time Frame

Construction of San Jose Irrigation Dam
- April 2009 to November 2009.

5.3.2.5 Expected Outputs (Column 6) All PPAs to be
implemented may have one or two MFOs or results (goods
and services) to be produced. Each MFO, in turn, shall have
36
at least two (2) Performance Indicators that will serve as
measures of change or development over the years. For
example:

MFO: Agricultural Services PIs: Number of farmer
beneficiaries
Extension Services Percentage increase in
harvest/production

5.3.2.6 Funding Source (Column 7) All PPAs described
in the AIP shall have their corresponding funding sources
ranked in the following order:

Specific Sources of Fund Tax revenue, non-tax
revenue, other sources of revenue that accrue to the
General Fund.

Financial Assistance/Aid from Other LGUs - consists
of financial assistance, aid or grant from other local
governments whose purpose is not defined or specified.

Financial Assistance/Aid from National Government
Agencies (NGAs) - grants or subsidy from the national
government which are released for a specific purpose or
for the general operating requirements of the recipient
LGU.

Loan Proceeds - receipts of funds coming from approved
loans negotiated for a specific purpose, usually for
infrastructure purposes or for the acquisition of heavy
equipment.

5.3.2.7 Estimated Cost (Columns 8, 9, 10, and 11) - The
total cost of the PPA is broken down into PS, MOOE, and
CO.

For purposes of the AIP, the total PS and MOOE costs of a
particular program or office, both line departments and
administrative/legislative support services, shall represent
the current operating cost for all regular activities. Costs
which add to the fixed assets of the LGU are categorized as
capital outlays.

37
Province/City/Municipality/Barangay:________________________
Prepared By: Attested by:
Planning Of f icer/PLDC Budget Of f icer Local Chief Executive
Date: Date: _____________ Date: _______________
Personal
Services
(PS)
(8)
FUNDING
SOURCE
(7)
Social Services
(30)
Annex A
Summary Form
Capit al Out lay
(CO) (10)
TOTAL
(11)
General Public Services
(10)
Economic Services
(80)
STARTING
DATE
(4)
COMLETION
DATE
(5)
AMOUNT (in t housand pesos)
Maint enance
and Ot her
Operat ing
Expenses
(MOOE)
CY ______ Annual Investment Program (AIP)
By Program/Project/Activity by Sector
As of _______________________
AIP REFERENCE
CODE (1)
PROGRAM/ PROJECT/ ACTIVITY
DESCRIPTION (2)
IMPLEMENTING
OFFICE/ DEPARTMENT
(3)
SCHEDULEOFIMPLEMENTATION
EXPECTED
OUTPUTS
(6)
The identification of the expected outputs, sources of funds
and the breakdown of the costs by PS and MOOE is the
responsibility of the LBO. The LPDC, on the other hand,
shall be responsible for accomplishing the reference code,
PPA description, and implementing office/department as
well as implementation schedule.































Figure 6. The AIP Summary Form



6.0 The PPA Structure

The translation into specific budgetary language of development
objectives, strategies and results are given flesh through the formulation
and development of a PPA structure.

38
PROGRAM - a homogenous group of activities necessary
for the performance of a major purpose for
which the government agency is established,
for the basic maintenance of the agencys
administrative operations, or for the provision
of staff support to the agencys administrative
operations or the agencys line functions.

PROJECT - a special undertaking to be carried out within
a definite time frame which is intended to
result in some pre-determined measure of
goods and services.

ACTIVITY - a work process designed to contribute to the
accomplishment of specific objectives and
the implementation of a program, sub-
program, or project.

6.1 What is a PPA Structure?

A PPA structure consists of programs, projects and activities
designed to achieve specific objectives or MFOs with
corresponding Performance Indicators.



















6.2 Samples of a PPA Structure


















GENERAL PUBLIC SECTOR

PROGRAM: Public Order and Safety
Policy Objectives:
This program shall accomplish the following:
Provide a safe, secure and peaceful community.
Protect lives and property
Expected Output:
Low incidence of crime against persons and properties
Zero casualty in man-made disasters
PROJECTS: Purchase of patrol cars, fire trucks and firefighting
equipment
Conduct of training programs, security and safety
drills for firemen and police officers
ACTIVITIES:
24-hour police surveillance and monitoring activities
Public awareness on peace and security measures
Seminars, training and orientation courses for firemen
and law enforcement officers





39

















































SOCIAL SECTOR

PROGRAM: Health

Policy Objectives:
This program shall accomplish the following:
Increase access to quality and affordable health
services.
Improve the knowledge and competency of
public health personnel.

Expected Output:
Increased number of patients diagnosed and treated
for emergency and non-emergency cases
Increased knowledge and competency skills of
public health personnel

PROJECTS: Construction of additional health facilities
Purchase of medical equipment
.
ACTIVITIES: Public health awareness activities
Health care assistance
Training of public health personnel on the latest
medical technology

















ECONOMIC SECTOR

PROGRAM: Agriculture

Policy Objectives:
This program shall accomplish the following:
Increase agricultural productivity by 15 percent.
Accelerate agricultural income of marginalized
farmers by 20 percent.

Expected Output:
Increased production in agriculture
Increased yield per hectare

PROJECTS: Construction of Irrigation Facilities

ACTIVITIES: Agricultural Extension in Palay Production
Demonstration Farms Research Activities
Training on New Farm Technologies






40
6.3 Review of Existing PPA Structure

Local budgeting shall include a periodic review (at least every
three years) and evaluation of the PPA structure to determine the
programs capacity to produce desired results. Performance
indicators shall be identified in LGU budget proposals to serve as
bases for measuring annual performance. The review of existing
programs should ascertain the relevance of present operations to
the wider policy objectives of the LGU as approved by the Local
Sanggunian.

The review of the current PPA structure follows a process as
shown in the diagram.















Figure 7. PPA Structure Review Process


6.4 Redesigning of Current PPA Structure

Current PPA structure found inconsistent with strategic policy
objectives as planned shall be redesigned following these steps:

Step 1. Review the existing regular activities or projects of a
specific program.

What are the objectives of the program?
Are the projects/activities relevant to the mission?
What are the output indicators of the program?
Are the results consistent with program objectives?
What activities/projects must be
redesigned/abolished?

A AN NA AL LY YZ ZE E
R RE ES SU UL LT TS S/ /
O OU UT TP PU UT TS S
O OF F P PP PA As s


S ST TA AT TU US S
Q QU UO O

R RE ED DE ES SI IG GN N
P PR RO OG GR RA AM M
S ST TR RU UC CT TU UR RE E
Relevant to or
Consistent with

P PO OL LI IC CY Y
O OB BJ JE EC CT TI IV VE ES S

Y YE ES S / / N NO O

D DE ET TE ER RM MI IN NE E
C CA AU US SE E/ /S S
I If f N NO O
I If f Y YE ES S
41

Step 2. Design the proper organization structure that will best
carry out the program objectives.

What are the tasks to be performed?
What is the optimum number of personnel that can
carry out the tasks efficiently and effectively?
What qualifications are required of personnel to
perform the tasks well?

Step 3. Redesign cost allocation and financial reporting
systems to improve efficiency.

What projects/activities produce results relevant to
the program objective?
What are the relevant costs/inputs that produce
results?
What is the cost (direct/indirect) on a per unit of
output?
Is the output cost effective?
What is the actual cost per activity/project for one
semester? Are there variances between budget and
actual cost?
What is the actual output per activity/project? Are
there variances between target output and actual
results?
Are the existing financial reporting systems useful
for management decision-making purposes?

6.5 PPA Performance

The PPA structure is the primary link between the plan and budget.
It should be understood, however, that the strength or weakness of
this linkage depends on the efficiency, effectiveness, and quality
of service delivery.

The review of PPA structures shall ensure that there is a clear
policy statement of objectives that define the purpose of the
program and the expected results to be used as basis in assessing
performance.


42
7.0 Reforms in Local Government Budgeting

The major budget reform introduced in the national government in the
late 1990s is the Public Expenditure Management (PEM) which is
operationalized by two basic frameworks:

The Medium-Term Expenditure Framework (MTEF) and
The Organizational Performance Indicator Framework (OPIF)

7.1 PEM reforms have been introduced/cascaded in local government
budgeting in 2005 by giving focus to an output-based and policy-
driven budget. PEM has three (3) basic outcomes aggregate
fiscal discipline (living within means), allocative efficiency
(spending on the right things), and operational efficiency
(obtaining value for money).

7.1.1 MTEF One of the means to achieve the three basic
outcomes of PEM is through MTEF which seeks to improve
predictability of funding and to identify strategic funding
priorities. It is both a top-down resource allocation approach
(expenditures are driven by credible policy priorities and
disciplined by reasonably projected revenues) and a bottom-
up estimation of the medium-term (3 years) cost of existing
policies of on-going PPAs. MTEF tries to link policies and
plans with the Medium Term Development Plan and its 3-
year expenditure program. It has two main components:

Forward Estimates (FEs) and
Paper on Budget Strategy (PBS)

FE is a computation of the 3-year future costs of existing
approved programs which are automatically rolled over into
budgeting allocations on an annual basis. At the local level,
this annual slice is the plan and budget integrated into the
AIP.

PBS is a budget document that contains the status of the
development priorities of government, the macroeconomic
outlook, budget performance and the projected budget
ceilings in the medium-term. It assists government to link
policy priorities, budget allocations and budget performance
to the preparation of the annual budget.

43


7.1.2 OPIF aims to account for outputs at the organization
level/perspective to measure LGU performance. It is an
expenditure management approach which allows the
strategic allocation and direction of resources towards the
achievement of desired outputs and results. It also provides
a mechanism for specifying and documenting expected
performance of each department/office in the LGU and
establishing its accountability.

7.1.3 The OPIF Process

The process discussed here is not rigidly structured. It is
simplified as an evolving process until it matures and
becomes part of the organizational culture. The OPIF
process includes the following:















Figure 8. The OPIF Process


7.1.4 The building of a logical framework (Logframe) is the first
basic step in OPIF. It gives the LGU a clear and logical
description why it exists, whom it will serve, what
goods/services are to be provided, how services/goods will
lead to the societal and sectoral goals. The formulation of
the logframe is shown in the following analytical
framework:

Formulation of a logical framework
Formulation of MFOs
Identification of PPAs
Determination of Performance Indicators
44





















7.1.5 The formulation of MFO is the key basic element of the
OPIF. This means analyzing the agency/LGU mandate and
determining the goods and services it is expected to deliver
to its clients and understanding why the output is so.

7.1.6 Identification of PPAs constitutes the strategy for the
delivery of MFOs. In this step, it is basic that the programs,
projects and activities shall be established as directly
connected and aligned to MFOs to determine which are
directly relevant and contributory to MFO delivery. With
budget allocated at the PPA level, expenditure may be
integrated at the MFO targets.

7.1.7 Performance Indicators are units of measures that best
represent the effectiveness and efficiency of a
department/office in a LGU in the delivery of is MFO. It is
also a measure to determine performance of a
department/office. It is a means of measuring what actually
happened against what has been planned in terms of quantity
and quality. At the MFO level, the quantity question will
refer to How much service/good did we deliver? while the
quality question will refer to How well did we deliver it?

ANALYTICAL FRAMEWORK
OF OPIF

SOCIETAL GOALS


SECTORAL GOALS

ORGANIZATIONAL OUTCOME


MAJOR FINAL OUTPUT


PPAs


BUDGET

PERFORMANCE
INDICATORS
TARGETS
IMPACT
OUTCOME
OUTPUTS
STRATEGIES
INPUTS
WHY?
WHAT?
WHO?
HOW?
45


Other attributes integrated into the measures include:

accessibility and timeliness of the service delivery
cost efficiency or cost of producing a unit of output

Performance Indicators should have the SMART attributes:

Specific (results the department/office is trying to
achieve)
Measurable (stated in quantifiable terms)
Achievable (realistic or capable of being achieved)
Relevant (logically related to the MFO)
Time-bound (with specific target dates)

Performance Indicators should have the CREAM attributes:

Clear, precise, unambiguous
Relevant, appropriate, timely
Economic, available at reasonable cost
Adequate, sufficient for performance assessment
Monitorable, or can be independently measured

7.1.8 Suggested steps in determining Performance Indicators

1. Involve policy-makers, planners, financial managers and
implementers in evolving relevant Performance
Indicators for a particular MFO. Make process more
interactive.

2. Develop Performance Indicators for MFOs before
determining impact and outcome indicators. For
budgeting concern develop Performance Indicators for
MFOs, to be evaluated and measured on a regular basis
(quarterly) to enable policy-makers to arrive at informed
decision for strategic planning and prioritizing PPAs for
resource allocation.

3. Develop Performance Indicators for impact and outcome.
These are necessary to measure and validate
organizational outcomes and confirm the sectoral and
societal goals
46
Performance
Indicators
-
.
7.1.9 Sample illustration of a department/office logframe.
Logical Framework (Agriculture Office)


SOCIETAL GOAL



SECTORAL
GOALS




ORGANIZATIONAL
OUTCOMES






MFOs




PPAs



7.1.10 Sample illustration of an MFO and Performance Indicator

Office - Agricultural Office
MFO - Agricultural Services
Farmer beneficiaries served
Percentage reduction in cost of
agricultural inputs
Percentage increase in wages of
agricultural workers
Percentage increase in export



Poverty Reduction and Improved Standard of Living
Food
Security
Global
Competitiveness
Increased
Rural Income
Sustainable
Development
Increased
agricultural
production/
productivity
Reduced cost
of primary
inputs
Improved
quality of
agricultural
products
Increased
employment
in agriculture
Research and
Development
Services
Plans and Policies
Development
Services
Agricultural
Support
Services
Operation of
Research Center
for Agriculture
Formulation of
Plans and Policies
Development
Seed Production
and Distribution
47
The core of the Manual is the updated
Budget Process. The Manual attempts to
integrate into the local budget process some
budget reforms introduced at the national
government level, e.g. the shift from an
input-based budget to a policy-driven and
output-based budget, preparation of local
expenditure program and budget of
expenditures and sources of financing in
budget preparation, the use of the local
budget matrix and allotment release order in
budget execution, and evaluation of budget
performance in budget accountability.

PART II. THE LOCAL BUDGET PROCESS








































48

The Budget Process

The budget process in Local Government Units (LGUs) consists of five (5)
phases. These are: (1) Budget Preparation; (2) Budget Authorization; (3)
Budget Review; (4) Budget Execution; and (5) Budget Accountability.

These phases are all part of a continuing process as shown in the diagram
below.
































Figure 9. The Budget Process





BUDGET
PREPARATION




BUDGET
AUTHORIZATION






BUDGET
ACCOUNTABILITY






BUDGET
REVIEW



BUDGET
EXECUTION

49


Chapter 1. Budget Preparation Phase


1.0 Introduction

2.0 Legal Basis of Budget Preparation

3.0 Key Players in Budget Preparation

4.0 The Budget Preparation Flow Chart

5.0 Steps in the Budget Preparation Phase
Step 1. Issue the Budget Call
What is a Budget Call?
Why is the Budget Call Important?
Conduct Budget Forum
Step 2. Prepare and Submit Budget Proposals
2.1 Determine Expected Outputs for the Budget Year
2.2 Estimate Costs for the Budget Year
2.3 Prepare the Project Procurement Management Plan
for the Budget Year
Review and Consolidation of Budget Proposals
Step 3. Conduct Budget Hearings and Evaluate Budget Proposals
3.1 Conduct Technical Budget Hearings
3.2 Evaluate Budget Proposals
Step 4. Prepare the Local Expenditure Program (LEP)
Legal Basis of the LEP
Guidelines in the Preparation of the LEP
Step 5. Prepare the Budget Message and Budget
of Expenditures and Sources of Financing (BESF)
Legal Basis of the Budget Message
What is a Budget Message?
Contents of the Budget Message
How to Prepare the Budget Message
Legal Basis of the BESF
What is the BESF?
Purposes of the BESF
Step 6. Submit Executive Budget to the Sanggunian


50


BESF Tables
BESF Table No. 1 - Summary of Statement on Receipts
and Expenditures
BESF Table No. 2 - Estimated Expenditures by PPA
and by Sector
BESF Table No. 3 - Actual and Estimated Expenditure Program
by Sector/Office
BESF Table No. 4 - Staffing Summary
BESF Table No. 5 - Summary Statement of Statutory
and Contractual Obligations and Budgetary Requirements
BESF Table No. 6 - Summary Statement of Long-term
Obligations and Indebtedness
6.0 Local Budget Preparation Forms
LBP Form No. 1 - Statement of Receipts
LBP Form No. 2 - Statement of Receipts
and Expenditures
LBP Form No. 3 - Programmed Appropriation and Obligation
by Object of Expenditure
LBP Form No. 3A Consolidated Programmed Appropriation
and Obligation by Object of Expenditure
LBP Form No. 4 - Personnel Schedule
LBP Form No. 5 - Functional Statements, Objectives
and Expected Results
LBP Form No. 6 - Statement of Debt Service
LBP Form No. 7 - Statement of Statutory and Contractual
Obligations and Budgetary Requirements
LBP Form No. 8 - Statement of Fund Operation
Supplemental Budget Preparation Forms
LBP Form No. 9 - Certified Statement of Funding Sources
LBP Form No. 10 - Statement of Supplemental Appropriation

7.0 Illustrative Example of a Budget Call

8.0 Illustrative Example of a Local Expenditure Program

9.0 Illustrative Example of a Budget Message

10.0 Technical Notes on Budget Preparation


51
The local chief executive shall prepare the executive budget for the
ensuing fiscal year (Section 318, R.A. No. 7160).

Budget Preparation Phase

1.0 Introduction

The budget preparation is the first phase in the local budget process. It
involves cost estimation per PPAs, preparation of budget proposals,
executive review of budget proposals, and preparation of the Budget
Message, Local Expenditure Program (LEP), and the Budget of
Expenditures and Sources of Financing (BESF). The last three (3)
documents comprise the Executive Budget. This phase starts with the
issuance of Budget Call and ends with the submission of the executive
budget to the Sanggunian on or before October 16 of each year.


2.0 Legal Basis






3.0 Key Players in Budget Preparation

3.1 Local Chief Executive The LCE shall prepare the executive
budget for the ensuing fiscal year upon receipt of the statements of
income and expenditure from the treasurer, the budget proposals
from the heads of departments and offices, and the estimates of
income and budgetary ceilings from the LFC. He shall submit the
said executive budget to the Sanggunian concerned not later than
the 16
th
of October of the current fiscal year (Section 318, R.A. No.
7160).

3.2 Local Finance Committee The LFC composed of the LPDC,
LBO, and the Local Treasurer shall, among others, have the
following functions:

a. Determine the income reasonably projected as collectible for
the ensuing fiscal year;
b. Recommend the appropriate tax and other revenue measures or
borrowings which may be appropriate to support the budget;
52
c. Recommend to the LCE the level of annual expenditures and
ceilings of spending for economic, social, and general public
services based on the approved local development plan;
d. Recommend to the LCE concerned the proper allocation of
expenditures for each development activity between current
operating expenditures and capital outlays; and
e. Recommend to the LCE concerned the amount to be allocated
for capital outlay under each development activity or
infrastructure project (Section 316, R.A. No. 7160).

3.3 Local Treasurer The Local Treasurer shall submit to the LCE a
certified statement covering the income and expenditures of the
preceding fiscal year, the actual income and expenditures of the
first two (2) quarters of the current year, and the estimated income
and expenditures for the last two (2) quarters of the current year
(Section 315, R.A. No. 7160).

3.4 Local Budget Officer - The LBO shall review and consolidate the
budget proposals of different departments and offices of the LGU.
Assist the LCE in the preparation of the budget and during budget
hearings (Section 475 [b (2-3)], R.A. No. 7160).

He shall prepare the draft Budget Message, the LEP, and the BESF
in coordination with the other members of the LFC prior to the
submission of said documents to the LCE.

3.5 Local Planning and Development Coordinator The LPDC
shall analyze the income and expenditure patterns, and formulate
and recommend fiscal plan and policies for consideration of the
finance committee of the LGU (Section 476 [6], R.A. No. 7160).

3.6 Local Accountant The Local Accountant, jointly with the Local
Treasurer, shall certify all statement of income and expenditures of
the preceding fiscal year, the actual income and expenditures of the
first two (2) quarters of the current year and the estimated income
and expenditure for the last two (2) quarters of the current year
(Article 411, IRR of R.A. No. 7160).

The Local Accountant may, by virtue of an Executive Order of the
LCE, be added as a member of the LFC in order for the Committee
to come up with an accurate data on actual income and
expenditures.
53
3.7 Heads of Departments and Offices The Heads of Departments
and Offices shall submit budget proposals for their respective
departments or offices to the LCE thru the LFC on or before the
15
th
of July of each year. Said budget proposal shall be prepared in
accordance with the AIP, and guidelines and spending ceilings
contained in the Budget Call and the other general requirements
prescribed under Section 317 of R.A. No. 7160.

4.0 The Budget Preparation Flow Chart

The budget preparation flow chart below (Figure 10) shows the sequence
of activities in preparing the executive budget for the budget year.






























Figure 10. The Budget Preparation Flow Chart



CONDUCT
BUDGET FORUM
PREPARE
AND SUBMIT BUDGET
PROPOSALS
START
END
ISSUE
THE BUDGET CALL
CONDUCT BUDGET
HEARING
PREPARE
THE LEP
PREPARE BUDGET
MESSAGE AND BESF
SUBMIT EXECUTIVE
BUDGET TO THE
SANGGUNIAN
June 5
October 10
July 5
July 15
August 15
September 30
October 16
ACTIVITY
INDICATIVE
SCHEDULE
LCE
LCE/LFC
Department
Heads
OFFICIALS
RESPONSIBLE
Department
Heads

LCE/LFC
LCE/LFC
LCE/LFC
LCE


REVIEW AND CONSOLIDATE
BUDGET PROPOSALS
LBO

54
5.0 Steps in the Budget Preparation Phase

There are six (6) steps in Budget Preparation:

Step 1. Issue the Budget Call

The Budget Call signals the start of the budget preparation phase. This
executive directive is prepared based on the approved AIP.

Embodied in the Budget Call are the spending ceilings, resource
allocation scheme or fiscal policy decisions, objectives, strategies,
priority PPAs and expected results. These are explained in budget
workshops or fora prior to the preparation of budget proposals.

Departments and Offices of the LGU shall be guided by the policies,
ceilings and proposed targets embodied in the Budget Call in the cost
estimation of their proposals.

Budget Proposals are reviewed as to their consistency with the AIP and
the Budget Call.

What is a Budget Call?

A Budget Call is a directive from the LCE that contains the general
objectives, specific sectoral objectives, policy decisions, strategies, and
prioritized PPAs by sector/office as reflected in the AIP. It provides
specific guidelines in the preparation of individual budget proposals:

Expenditure ceiling by sector/office
Allocation scheme by MFO and PPA
Budget calendar and budget preparation forms
Other administrative guidelines

This directive shall be issued between June 15 and June 30 to allow more
time for the Department Heads to formulate reasonable proposals for the
budget year.

Why is the Budget Call Important?

The Budget Call is important because:

It provides a venue for aligning the budget with the approved
AIP;
55
It describes guidelines to be observed in the preparation of
budget proposals;
It focuses on the specific outputs or outcomes aimed to be
attained through the budget for the year;
It firms up policy decisions on how the budget shall be
financed; and
It prescribes the budget preparation schedule and forms.

An illustrative example of a Budget Call is shown on pages 88-91.

Conduct Budget Forum

A one-day forum on the Budget Call for all Department Heads is
necessary to explain the following:

Specific objectives for the budget year, major thrusts and policy
directions;
Sources of income for the past three (3) years;
Major assumptions used in estimating the income for the budget
year; and
Spending ceilings and budget strategies.

The Budget Forum shall be initiated by the LFC and coordinated by the
LBO, with the following topic assignments:

Objectives and Targets for the Budget Year - LPDC
Income Estimates and Sources of Income for the Budget Year -
Local Treasurer
Spending Ceilings and Budget Strategies - LBO
Budget Policies for the Budget Year - LCE


Step 2. Prepare and Submit Budget Proposals

The budget proposals are prepared by the department heads and
submitted to the LBO for review and consolidation. There are two (2)
factors to consider in preparing the budget proposal for the budget year:

The objectives and expected outputs; and
The cost estimates within budgetary ceilings.


56
2.1 Determine Expected Outputs for the Budget Year

The specific objectives or expected outputs for the budget year
shall be based on the MFOs and Performance Indicators of a
particular department/office. These are likewise found in the
approved AIP for the budget year. A review of the MFOs and
Performance Indicators on a per PPA basis shall be undertaken to
determine the contribution of the PPAs to the expected outputs for
the budget year.

2.2 Estimate Costs for the Budget Year

There are two primary costs to be estimated for the budget year: the
current operating expenditures and the capital outlays. Current
operating expenditures refer to the costs of providing
services/delivering goods to target clientele or service area
primarily for the implementation of the regular activities of the
department or office. Capital outlay costs refer to the costs of
procuring civil works projects or the acquisition of equipment to
facilitate or enhance delivery of goods or services.

2.3 Prepare the Project Procurement Management Plan
(PPMP) for the Budget Year

The preparation of the PPMP should be guided by the expected
outputs and cost estimates embodied in the approved AIP. The
PPMP is prepared simultaneously with the budget proposal to
provide details on the mode of and schedule of procurement,
technical description and specifications of the goods, equipment
and civil works to be procured and their proposed budgets. This
plan is an important factor in determining and projecting the
quantity and quality of the expected outputs of the PPAs.

Review and Consolidation of Budget Proposals

The LBO shall review budget proposals as to their consistency with the
policies set forth in the budget call and compliance with the budgetary
requirements, general limitations and other provisions under R.A. No.
7160. Budget proposals not in conformity with the policies and
guidelines shall be returned for revision.

All budget proposals shall be consolidated by the LBO for submission to
the LFC to be used in the conduct of budget hearings.
57

Step 3. Conduct Budget Hearings and Evaluate Budget Proposals

The hearing and evaluation of budget proposals shall follow these sub-
steps:

3.1 Conduct technical budget hearings

The purpose of technical budget hearings is to rationalize the
existence of the department/office and to validate the expected
outputs and cost estimates for the budget year. This should be
conducted for at least ten (10) working days (August 15 to 25).

3.2 Evaluate budget proposals

The members of the LFC shall evaluate all budget proposals using
the output and cost criteria. The proposal shall provide enough
basis to establish that outputs can be accomplished vis--vis the
funding allocation for the purpose.

Step 4. Prepare the LEP

The first major document of the executive budget to be prepared is the
LEP.









Guidelines in the Preparation of the LEP

4.1 The first part of the LEP is the receipts program. The
income structure shall cover the immediate past year, the
current year, and the budget year.

Beginning Cash Balance shall be net of amounts
earmarked for specific purposes (e.g., continuing
appropriations, 20% Development Fund).
Legal Basis

Local government budgets shall primarily consist of two (2) parts,
namely, the estimates of income; and the proposed appropriations
covering the current operating expenditures and capital outlays
(Section 314[a], R.A. No. 7160).

58

Receipts sources These are generated from LBP Form
Nos. 1 and 2.

Local (Internal) Sources
1. Tax Revenue
2. Non-Tax Revenue
External Sources
1. Shares from National Internal Revenue Taxes
(IRA)
2. Share from GOCCs
3. Other shares from National Tax Collection
4. Extraordinary Receipts
5. Inter-local transfers
6. Capital/investment receipts
Receipts from loans and borrowings

Other Sources of Revenue

Any proposed measure/s to increase the income of the
LGU shall be subject to approval by the Sanggunian.
These new revenue measures may include the following:

New or additional local taxes, charges, fees, fines or
penalties
Loan proceeds (to finance capital projects).

4.2 The second part of the LEP is the expenditure program. The
details of the expenditure program shall be presented by
sector, department or office, special purpose appropriations,
PPA, and expense class for a three year period (past year,
current year, budget year). Each department or office shall
have the following presentation of the expenditure program:

Functional statement, objectives and expected results.
Each department or office shall present, by PPA, the
programs and functions under its present mandate.

The program structure shall reflect the expected outputs
and Performance Indicators for each PPA since it is the
key result area and responsibility center (Please refer to
LBP Form No. 5 on page 80).

59
Proposed new appropriations language for the budget
year. This is presented by PPA and the corresponding
budget requirements are broken down by expense class.
(Please refer to LBP Form No. 5 on page 80).

Information on personnel to be hired on casual or
contractual basis shall also be included. The number of
personnel and their respective salaries shall be disclosed to
determine the overall salaries and wages of a department
or office (Please refer to LBP Form No. 4 on page 79).

Special Provisions. Policies on the use of funds, specific
purpose/s or expected outputs and measures to reduce cost
shall be provided after the presentation of the expenditure
program for each department or office.

4.3 Special Purpose Appropriations shall be provided for the
following purposes:

Appropriation for Development Projects - 20% of IRA
(Section 287, R.A. No. 7160)

Appropriation for Unforeseen Expenditures Arising from
the Occurrence of Calamities - 5% of regular income
(Section 324 [d], R.A. No. 7160)

Appropriation for Debt Service Not exceeding twenty
percent (20%) of the regular income (Section 324 [b], R.A.
No. 7160)

Budgetary Support to Local Economic Enterprises/Public
Utilities (Section 313, R.A. No. 7160)

Aid to Barangays (Section 324 [c], R.A. No. 7160 )

Other authorized special purpose appropriations

The presentation of the Special Purpose Appropriation shall
follow a similar sequence as the department or office
expenditure program except the staffing and compensation
profile where there are no personnel and office to operate.

60
A Special Provision shall also be included to provide
guidelines in the use of the fund pursuant to existing
accounting, budgeting and auditing rules and regulations.

For easy monitoring and evaluation of fund utilization, the
LFC shall formulate the guidelines on the release and use of
Special Purpose Appropriations under the Needing
Clearance of the Local Budget Matrix.

The LCE shall be responsible for the execution of Special
Purpose Appropriations.

4.4 The fourth part of the LEP, the General Provisions, includes
guidelines on receipts, income and expenditure policies.

Explicit provisions on the manner and procedure for
revenue generation and utilization shall be provided as
guideposts for avoiding delays in the implementation of
development projects and activities.

General guidelines, for example, on the treatment of
income coming from the operation of local economic
enterprises and public utilities, shall be clearly provided.

The LEP shall also provide guidelines on the expenditure
side, specifically for personal services and all other
personnel benefits, for maintenance and other operating
expenses, and for capital outlays.

These guidelines shall be supported by rules and policies
coming from oversight agencies like the COA, the CSC,
the DBM and the DILG.

4.5 The last part of the LEP is a Summary of the Fiscal Year
New Appropriations by Department/Office and Special
Purpose Appropriations. It reflects the total proposed budget
for the budget year.

The LEP shall be the material document for deliberation by
the Sanggunian. It shall serve as part of the appropriations
bill to be submitted to the Sanggunian for authorization or
legislation.

An illustrative example of LEP is shown on pages 92-98.
61
Step 5. Prepare the Budget Message and Budget of Expenditures
and Sources of Financing











What is a Budget Message?

A Budget Message is a summary of the proposed executive
budget prepared by the LCE highlighting the following:

Previous Years Fiscal Performance
Development Goals and Objectives
Policy Thrusts
Priority PPAs
Estimates of Income and Sources Thereof
Major Items in the Expenditure Program
Expected Outputs

Contents of the Budget Message

The Budget Message provides justification for the policy decisions
contained in the proposed executive budget. It should include,
among others, the following:

Proposed budget by sector, office and expenditure class;

Justification for the need to expand (increased number of
beneficiaries) without sacrificing quality of service delivery;

Identification of new/additional beneficiaries if service delivery
is expanded; and

Justification statements for new PPAs to be implemented during
the budget year.


Legal Basis

The budget document shall contain A budget message of the
local chief executive set forth in brief the significance of the
executive budget, particularly in relation to the approved local
development plan. (Section 314 [b], R.A. No. 7160)
62

How to Prepare the Budget Message

5.1 Present the objectives, policies, strategies, and priority
programs/projects activities of the LGU for the budget year
and relate their consistency with the proposed revenue and
expenditure structure.

Explain the program thrusts and the justification or
reasons why resources have to be focused on said
programs.

Include with the justification the expected results of the
projects and activities that will rationalize budget
allocation and accountability.

5.2 Identify the flagship projects by sector and by program
and relate how they are envisioned to carry out the
development goals for the next three (3) years.

5.3 Review the past five (5) years revenue and expenditure
patterns and disclose what basic services and facilities were
provided.

Present in simple graphs or charts the income trend and
expenditure pattern showing what results or output were
produced during the period.

5.4 Discuss the current years income and expenditure
performance and disclose any improvements in the
production of results as compared with those during the past
five (5) years.

5.5 Disclose service gaps to show the inability of the LGU to
deliver basic services. This may be used as a major
justification for proposals to expand the budget for a
sector/office.

Show the analysis in graphical form: The comparison of
performance for the last five (5) years vis--vis the
performance for the current year.

Discuss and explain policy decisions that will improve
service delivery in terms of quality, quantity, and
63
Legal Basis

The budget document shall contain a summary of financial
statements setting forth the following:

The actual income and expenditures during the immediately
preceding year;

The actual income and expenditures for the first two (2) quarters
and the estimates of income and expenditures for the last two (2)
quarters of the current fiscal year;

The estimates of income for the ensuing fiscal year from
ordinances and laws existing at the time the proposed budget is
transmitted, together with other revenue-raising proposals;

The estimated expenditures necessary to carry out the functions,
projects and activities of the local government unit for the
ensuing fiscal year;

All essential facts regarding the bonded and other long-term
obligations and indebtedness of the local government unit, if any;

Summary statement of all statutory and contractual obligations
due; and

Such other financial statements and data as are deemed necessary
or desirable to disclose in practicable detail the financial
condition of the local government unit (Section 314 [b(3)], R.A.
No. 7160).

timeliness criteria. Relate the funding to the issues being
resolved by the proposed spending policies.

Summarize the goods and services to be delivered for the
budget year. These are the expected results of the budget
designed to close the service gaps.

An illustrative example of a Budget Message is shown on
pages 99-103.


Budget of Expenditures and Sources of Financing

























64
What is the BESF?

The Budget of Expenditures and Sources of Financing or BESF
is a detailed and graphical presentation of the expenditure program
of an LGU covering actual obligations for the past year, actual and
estimated expenditures for the current year, and the proposed
budget program for the ensuing year. The sources of financing the
expenditure program for the budget year are also disclosed to show
how the past, current, and proposed budget are financed by the
LGU.

The BESF shall be prepared by the LFC to be approved by the
LCE.

Purposes of the BESF

Provide a three-year comparative data of the income/receipts
and expenditure program by sector, department/office, and
expense class.

Disclose the extent of compliance of the LGU with the
budgetary requirements.

Disclose the LGUs compliance with statutory and contractual
obligations.

Provide information on the sources of financing the expenditure
program for the three-year period.

Provide information on the capacity of the LGU to service its
long-term obligations and indebtedness.


Step 6. Submit Executive Budget to the Sanggunian not later than the
16
th
of October of the current year (Section 318, R.A. No. 7160).



BESF Tables
BESF Table No. 1

SUMMARY STATEMENT OF RECEIPTS AND EXPENDITURES
65
(In 000 Pesos)
Particulars
Account
Code

Past
Year
(Actual)
Current Year
Budget
Year
(Estimate)
Total
(Actual) (Estimate) Total
(1) (2) (3) (4) (5) (6) (7) (8)
I. Beginning Cash Balance

II. Receipts:
A. Local Sources
1. Tax Revenue
a. Real Property Tax
b. Special Education Tax

c. Other Local Taxes

Total Tax Revenue

2. Non-Tax Revenue
a. Regulatory Fees
1. License Fees
2. Permit Fees
3. Other Fees
b. Business and Service
Income

c. Other Income/Receipts
Total Non-Tax Revenue

B. External Sources

1. Shares from National Internal
Revenue Taxes (IRA)

2. Share from GOCCs
3. Other Shares from National
Tax Collections

a. Share from Ecozone
b. Share from EVAT
c. Share from National Wealth
d. Share from Tobacco
Excise Tax

4. Extraordinary Receipts
a. Grants and Donations
b. Other Subsidy Income

5. Inter-local Transfers

a. Subsidy from LGUs

b. Subsidy from Other Funds
6. Capital/Investment Receipts
a. Gain on Sale of Assets
b. Gain on Investments
C. Receipts from Borrowings
Total Receipts

Total Available Resources for
Appropriation (I II)



III. Expenditures
1.0 Current Operating Expenditures

1.1 Personal Services
Salaries and Wages
Regular
Salaries and Wages Others
______________________
______________________

1.2 Maintenance and Other
Operating Expenses
Travel Expenses

66























BESF Table No. 2

ESTIMATED EXPENDITURES BY PPA AND BY SECTOR
(In 000 Pesos)
Programs/Projects/Activities
Office/
Department
Budget Year
(Estimate)
(1) (2) (3)
Training and Scholarship
Expenses
______________________
______________________

2.0 Capital Outlay

Buildings and Other Structures
Office Equipment
Land Transport Equipment
______________________
______________________

3.0 Financial Expenses

Total Expenditures

Ending Balance [(I+II)-III]
INSTRUCTIONS

BESF Table No. 1 summarizes actual and estimated receipts coming from all
sources (tax and non-tax revenue) and actual and estimated expenditures by
allotment class. This table reflects how the past, current, and budget year
expenditures are financed. It also discloses balances in income/receipts, if there
are any, that were not appropriated during the year. Data for this form shall be
taken from LBP Form Nos. 1 and 3A.

Beginning cash balance shall be net of amounts earmarked for specific purposes
{e.g., continuing appropriations, 20% Development Fund, payables, others
(restricted funds)}.

A separate BESF Table No. 1 shall be prepared for local each economic
enterprise/public utility, if applicable.

67
1. General Public Services Sector
Program
Activity 1
Activity 2
Project 1
Project 2

Sub-Total
2. Economic Services Sector
Program
Activity 1
Activity 2
Project 1
Project 2

Sub-Total
3. Social Services Sector
Program
Activity 1
Activity 2
Project 1
Project 2

Sub-Total
4. Other Services Sector
Program
Activity 1
Activity 2
Project 1
Project 2

Sub-Total
T O T A L
























INSTRUCTIONS

BESF Table No. 2 shall reflect the proposed expenditures by program, project, activity
within a sector and by office/department. The classification of PPAs that should fall within
a sector shall follow these guidelines:

1. General Public Services Sector- All PPAs that provide planning, financial,
administrative, legal and legislative services to the front-line services of the LGU shall
be categorized within this sector.
2. Economic Services Sector- All PPAs directed towards promoting growth in the
economy, using all factors in production, like increasing productivity in agriculture and
all other industries, generating employment and other livelihood projects, shall fall
within this sector.
3. Social Services Sector- All PPAs that promote the well-being and general welfare of
constituents or people like education, health, public safety, and protection of the
marginalized and disadvantaged members of society, shall be classified within this
sector.
4. Other Services - PPAs that cannot be categorized in any of the sectors identified
above

It is possible that a PPA may not be categorized under either social or economic services
sector. In cases like this, it is safest to classify it under the general public services sector.

Data for this form shall be taken from LBP Form No. 5.


68




TOTAL

























BESF Table No. 3

ACTUAL AND ESTIMATED EXPENDITURE PROGRAM
BY SECTOR/OFFICE
(Three (3)-Year Period)
(In 000 Pesos)

Sector/Office Past Year Current Year Budget Year
(1) (2) (3) (4)

General Public Services
______________
______________
Economic Services
______________
______________
Social Services
______________
______________

Other Services
______________
______________


INSTRUCTIONS

BESF Table No. 3 classifies expenditure by sector and the implementing offices
within the sector using BESF Table No. 2 as a guide. Data here show
comparative figures in magnitudes for the past year (Actual) current year (Actual
and Estimated) and for the budget year (Estimated). It is possible that an office
or department may appear in two or more sectors, like the engineering office
where it provides infrastructure services to all sectors. It is all right for as long as
the total amount shall not exceed the appropriations for the whole office. Other
Services Sector are services that cannot be categorized in any of the sectors
identified above.

Data for this form shall be taken from LBP Form Nos. 3, 5 and 8.

69
BESF Table No. 4

STAFFING SUMMARY

Particulars
Past Year
(Actual)
Current Year
(Actual)
Budget Year
(Proposed)
No.
Salaries
& Wages
No.
Salaries
& Wages
No.
Salaries &
Wages
(1) (2) (3) (4) (5) (6) (7)

A. Permanent Positions (Filled)

1. Key Positions with RATA

2. Other Technical Positions

3. Administrative Positions

Total: Filled Permanent Positions

Add: Unfilled Authorized Positions

TOTAL: Permanent Positions

B. Non-Permanent Positions (Filled)

1. Contractual

2. Casual/Emergency

Total: Filled Non-Permanent
Position

Add: Unfilled Non-Permanent
Positions

TOTAL: Non-Permanent Positions


Total Permanent/Non-Permanent
Positions














INSTRUCTIONS

BESF Table No. 4 provides information on the staffing complement of the LGU. It
segregates permanent positions into key, technical, administrative positions.
These data are important in evaluating whether the LGU is under or over staffed
as reflected in the number of non-permanent positions. The comparative data for
three (3) years will show the number and salaries and wages of authorized and
proposed positions for the current and budget years, respectively.

Data for this form shall be taken from LBP Form No. 4.



70

BESF Table No. 5

SUMMARY STATEMENT OF STATUTORY AND CONTRACTUAL
OBLIGATIONS AND BUDGETARY REQUIREMENTS
(In 000 Pesos)

Particulars
Basis of
Computation
Computed
Amount
(1) (2) (3)

1. Statutory and Contractual Obligations
1.1 Contribution of LGUs in NCR to MMDA
(R.A. No. 7924)
1.2 Prior Years Obligation (if any)

1.3 Terminal Leave and Retirement Gratuity
Benefits (compulsory retirement age/end of
term for elective officials)
1.4 Debt Service



Regular income only
X 5%
Appropriation
Ordinance
Service Record


Should not exceed
20% of regular
income for BY




2. Budgetary Requirements
2.1 20% of IRA for Development Fund

2.2 5% Calamity Fund

2.3 Financial Assistance to Barangays (P1,000
minimum aid)




IRA for the budget
Year X 20%
Regular income for
BY X 5%
No. of barangays in
a particular LGU X
P1000


T O T A L















BESF Table No. 6

SUMMARY STATEMENT OF LONG-TERM OBLIGATIONS
INSTRUCTIONS

BESF Table No. 5 shall disclose relevant data on the computation of
mandatory obligations of the LGU. Any deficiencies reflected herein shall be
corrected at once to show compliance with R. A. No. 7160. A separate
schedule to show actual computation may be done by the LGU to advocate the
principle of transparency.

Data for this form shall be taken from LBP Form No. 7.



71
AND INDEBTEDNESS
(In 000 Pesos)

Creditor
Date
Contracted
Term Amount
Previous Payment Amount Due BY Balance
Interest Principal Total Interest Principal Total Interest Principal Total
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)































T O T A L























6.0 LOCAL BUDGET PREPARATION FORMS

LBP Form No. 1
INSTRUCTIONS

BESF Table No. 6 shows the capacity of the LGU to service its debt,
reflecting thereat the amount to be paid as provided in R.A. No. 7160.
The period covered includes previous payments for the past and current
years to show how much more is to be paid for the budget year and next
coming years which are within the debt service cap.

Data for this form shall be taken from LBP Form No. 6

72

STATEMENT OF RECEIPTS
__________________________
Province/City/Municipality

General Fund

Particulars
Account
Code
Income
Classification
Amounts
Past Year
(Actual)
Current
Year
(Estimate)
Budget
Year
(Proposed)
(1) (2) (3) (4) (5) (6)
I. Beginning Cash Balance



II. Receipts:


A. Local (Internal) Sources


1. Tax Revenue


a. Real Property Tax


b. Special Education Tax


c. Other Local Taxes


Total Tax Revenue


2. Non-Tax Revenue


a. Regulatory Fees


1. License Fees


2. Permit Fees


3. Other Fees


b. Business and Service Income


c. Other Income/Receipts


Total Non-Tax Revenue


B. External Sources


1. Shares from National Internal Revenue
Taxes (IRA)


2. Share from GOCCs


3. Other Shares from National Tax
Collections


a. Share from Ecozone


b. Share from EVAT


c. Share from National Wealth


d. Share from Tobacco Excise Tax


4. Extraordinary Receipts


a. Grants and Donations


b. Other Subsidy Income


5. Inter-local Transfers


a. Subsidy from LGUs


b. Subsidy from Other Funds


6. Capital/Investment Receipts


a. Gain on Sale of Assets


b. Gain on Investments


C. Receipts from Loans and Borrowings


Total Receipts





Total Available Resources for Appropriation








Continuation of LBP Form No. 1



73

We hereby certify that the foregoing estimated receipts are reasonably projected as collectible for
the Budget Year.


_________________ _____________________ ___________________
LOCAL TREASURER LOCAL BUDGET OFFICER LOCAL PLANNING
AND DEVELOPMENT
COORDINATOR

Approved by:

______________________
LOCAL CHIEF EXECUTIVE








































LBP Form No. 2
INSTRUCTIONS

This form is intended to reflect the following:

Column 1 Indicate receipts by major source. Beginning cash balance shall
be net of amounts earmarked for specific purposes {e.g., continuing
appropriations, 20% Development Fund, payables, others (restricted
funds)}.

Column 2 Indicate the account code for each itemized receipt using the
Chart of Accounts prescribed by COA.

Column 3 Indicate for each receipt the letter R if the receipt is classified as
regular or NR if non-regular.

Column 4 Indicate past years actual receipts. The past years and the first two
quarters of the current years actual receipts shall be jointly certified by
the Local Treasurer and the Local Accountant.

Column 5 Indicate current years estimated receipts. The current years estimated
receipts shall be prepared by the Local Budget Officer.

Column 6 Indicate budget years projected receipts. The budget years
estimated receipts shall be the income reasonably projected as
collectible for the ensuing fiscal year as the LFC may determine.

A separate LBP Form No. 1 shall be prepared for each local economic
enterprise/public utility.

74


STATEMENT OF RECEIPTS AND EXPENDITURES
__________________________
Province/City/Municipality

General Fund
Particulars
Account
Code
Past Year
(Actual)
CURRENT YEAR
APPROPRIATION
First
Semester
(Actual)
Second
Semester
(Estimate)
TOTAL
(1) (2) (3) (4) (5) (6)
I. Beginning Cash Balance





II. Receipts


A. Local Sources


1. Tax Revenue


a. Real Property Tax


b. Special Education Tax


c. Other Local Taxes


Total Tax Revenue


2. Non-Tax Revenue


a. Regulatory Fees


1. License Fees


2. Permit Fees


3. Other Fees


b. Business and Service Income


c. Other Income/Receipts


Total Non-Tax Revenue


B. External Sources


1. Share from National Internal Revenue
Taxes (IRA)


2. Shares from GOCCs


2. Other Shares from National Tax
Collections


a. Share from Ecozone


b. Share from EVAT


c. Share from National Wealth


d. Share from Tobacco Excise Tax


4. Extraordinary Receipts


a. Grants and Donations


b. Other Subsidy Income


5. Inter-local Transfers


a. Subsidy from LGUs


b. Subsidy from Other Funds


6. Capital/Investment Receipts


a. Gain on Sale of Assets


b. Gain on Investments


C. Receipts from Loans and Borrowings





Total Receipts ( I + II )








Continuation of LBP Form No. 2


75




III. Expenditures


A. General Public Services


B. Economic Services


C. Social Services


D. Other Services
TOTAL EXPENDITURE


IV. Ending Balance ( I = II ) - III



Certified Correct:

____________________ _________________________ _________________________
LOCAL TREASURER LOCAL BUDGET OFFICER LOCAL ACCOUNTANT


Approved:

________________________
LOCAL CHIEF EXECUTIVE





























INSTRUCTIONS

This form is intended to reflect the following:

Column 1 Indicate receipts by major source. Beginning cash balance shall
be net of amounts earmarked for specific purposes (e.g., continuing
appropriations, 20% Development Fund).

Column 2 Indicate the account code for each itemized receipt using the
Chart of Accounts prescribed by COA.

Column 3 Indicate past years actual receipts and expenditures. The past years
and the first two quarters of the current years actual receipts and
expenditures shall be jointly certified by the Local Treasurer and the Local
Accountant.

Columns 4, 5 and 6 Indicate current years estimated receipts and expenditures, as
follows:
first semester actual receipts and expenditures jointly certified by
the Local Treasurer and the Local Accountant
second semester estimated receipts and expenditures prepared by
the Local Budget Officer

Prepare the same form for each local economic enterprise/public utility.

76

LBP Form No. 3

PROGRAMMED APPROPRIATION AND OBLIGATION
BY OBJECT OF EXPENDITURE

OFFICE / SPECIAL PURPOSE APPROPRIATIONS:

Object of Expenditure
Account
Code
Past
Year
(Actual)
Current
Year
(Estimate)
Budget
Year
(Proposed)
(1) (2) (3) (4) (5)

1.0 Current Operating Expenditures

1.1 Personal Services
Salaries and Wages Regular
Salaries and Wages Others
______________________
______________________

1.2 Maintenance and Other
Operating Expenses
Travel Expenses
Training and Scholarship
Expenses
______________________
______________________

2.0 Capital Outlay

Buildings and Other Structures
Office Equipment
Land Transport Equipment
______________________
______________________

3.0 Financial Expenses



Total Appropriations


Prepared: Reviewed: Approved:


_________________ ____________________ ____________________
Department Head Local Budget Officer Local Chief Executive







77











































PROGRAMMED APPROPRIATION AND OBLIGATION BY OBJECT OF
EXPENDITURE


INSTRUCTIONS

This form is intended to reflect the following:

Column 1 Indicate the applicable Objects of Expenditures.

Indicate under Financial Expenses whether the amounts represent bank
charges, interest expense, commitment charges, documentary stamp expense
and other financial charges, losses incurred relative to foreign exchange
transactions and debt service subsidy to GOCCs consistent with NGAS.

Column 2 Indicate account code using the Chart of Accounts as prescribed by COA.

Column 3 Indicate the actual amounts incurred in the Past Year per column (3)
of LBP Form No. 2.

Column 4 Indicate the estimated amounts for the current year per Column (6)
of LBP Form No. 2.

Column 5 Indicate the proposed amounts to be appropriated.

Prepare the same form for each local economic enterprise/public utility.

The Local Budget Officer shall prepare a summary for all offices using this form.




78

LBP Form No. 3A

CONSOLIDATED PROGRAMMED APPROPRIATION AND OBLIGATION
BY OBJECT OF EXPENDITURE

SUMMARY FOR ALL OFFICES / SPECIAL PURPOSE APPROPRIATIONS:

Object of Expenditure
Account
Code
Past
Year
(Actual)
Current
Year
(Estimate)
Budget
Year
(Proposed)
(1) (2) (3) (4) (5)

4.0 Current Operating Expenditures

1.1 Personal Services
Salaries and Wages Regular
Salaries and Wages Others
______________________
______________________

1.2 Maintenance and Other
Operating Expenses
Travel Expenses
Training and Scholarship
Expenses
______________________
______________________

5.0 Capital Outlay

Buildings and Other Structures
Office Equipment
Land Transport Equipment
______________________
______________________

6.0 Financial Expenses



Total Appropriations


Prepared: Reviewed: Approved:


_________________ ____________________ ____________________
Department Head Local Budget Officer Local Chief Executive







This form is intended to reflect the summary of Programmed Appropriation and Obligation by
Object of Expenditure for all offices as reflected in LBP Form No. 3
79

LBP Form No. 4

PERSONNEL SCHEDULE
Budget Year : ______________
Province/City/Municipality: ___________________
OFFICE:

Item
Number
Position Title
Name of
Incumbent
Current Year
Authorized
Rate/Annum
Budget Year
Proposed
Rate/Annum
Increase/
Decrease
SG/
Step
Amount
SG/
Step
Amount
(1) (2) (3) (4) (5) (6) (7) (8)



















Prepared: Reviewed:

_________________________________ __________________
Human Resource Management Officer Local Budget Officer

Approved:

___________________
Local Chief Executive




















INSTRUCTIONS

This form is intended to reflect the following:

Column 1 - The item number.
Columns 2 and 3 - The position title and the name of the incumbent occupying each position. If the position
is unfilled, indicate the word vacant. If the position is proposed for abolition, bracket the old
item number, position title, and the authorized salary for the current year. If the position is
proposed for reclassification, bracket the previous position title and indicate the proposed
position title below it.
Columns 4 and 5 - For the authorized salary for the current year. Indicate the circular implemented and the
salary grade/step and rate per annum of each position. For initial implementation/changes in
approved PAL, attach copy thereof.
Columns 6 and 7 - For the proposed salary for the budget year. Indicate the salary grade/step and rate per
annum of each position.

Column 8 - The proposed salary increase/decrease is the difference between the old and new rates of
compensation per annum for the budget year.

Prepare the same form for each local economic enterprise/public utility.
80






















LBP Form No. 5

FUNCTIONAL STATEMENTS, OBJECTIVES and EXPECTED RESULTS
Department/Office :____________________
Budget Year_________________


I. FUNCTIONAL STATEMENTS
_____________________________________________________________________
_____________________________________________________________________
II. OBJECTIVES
_____________________________________________________________________

III. PROGRAMS/PROJECTS/ACTIVITIES
Reference
Code
Program/Project /Activity
Description
Cost
(000)
Performance/
Output
Indicator
Annual
Targets
Implementation
Schedule
FROM TO
(1) (2) (3) (4) (5) (6) (7)








Prepared: Reviewed: Approved:
__________________ ___________________ _____________________
Department Head Local Budget Officer Local Chief Executive

Reviewed as to consistency with approved AIP.

INSTRUCTIONS

Summarize briefly the function of the Department/Office in outline or capsulized statement. The mandate
of the office should be clearly described.

Specify the objectives of the office for the budget year.

Part III contains the following:
Column 1 - Indicate in the AIP Reference Code for the specific PPA to be implemented for the budget
year.
Column 2 - Describe briefly the PPA to be implemented.
Column 3 - Indicate the proposed funding for the PPA.
Column 4 - Specify the expected output of the PPA in terms of performance indicators, e.g., number of
children provided pre-education, kilometers of road cemented.
Column 5 - Specify the quantity, quality and timeliness of PPA in terms of targets.
Columns 6 and 7 - Indicate the start and completion of the PPA within the year.


81

LBP Form No. 6

STATEMENT OF DEBT SERVICE
Budget Year : ____________________
Province/City/Municipality:_________________
FUND/SPECIAL ACCOUNT:

Creditor
Date
Contracted
Term
Principal
Amount
Previous Payments
Made
Amount Due
(Budget Year)
Balance
of the
Principal
Principal Interest Total Principal Interest Total
(1) (2) (3) (4) (5) (6) (7)




























T O T A L

Certified Correct: Noted:

________________ ___________________
Local Accountant Local Chief Executive



























INSTRUCTIONS

This form is intended to reflect the following:

Column 1 - Full name of creditors with their corresponding addresses under each fund/special
account and under each office.

Column 2 - Date when the obligation is incurred

Column 3 Period (months/years) within which to pay the loan.

Column 4 Principal amount of the loan.

Column 5 Total payments prior to budget year, including payments within the current year.

Column 6 - Amounts due and budgeted for the budget year.

Column 7 - Balance of the principal after deducting previous payments and amount due for the
budget year [Columns 4 - (5+6)].

Prepare the same form for each local economic enterprise/public utility.

82

LBP Form No. 7

STATEMENT OF STATUTORY AND CONTRACTUAL OBLIGATIONS
AND BUDGETARY REQUIREMENTS
Budget Year: ____________________
Province/City/Municipality:_________________


1. Statutory and Contractual Obligations

1.1 5% MMDA Contribution for LGUs in NCR only
(R.A. No. 7924)
1.2 Prior Years Obligation (if any)
1.3 Terminal Leave and Retirement Gratuity
Benefits (compulsory retirement age/end of
term for elective officials)
1.4 Debt Service



A m o u n t

2. Budgetary Requirements

2.1 20% of IRA for Development Fund



2.2 5% Calamity Fund

2.3 Financial Assistance to Barangays (P1,000
minimum aid)


A m o u n t

T O T A L


Certified Correct: Approved:

Local Finance Committee:

_________________ _____________ _________________ ____________________
Local Budget Officer Local Treasurer Local Planning and Local Chief Executive
Development Officer












INSTRUCTIONS

This form is will present the statutory and contractual obligations, and budgetary requirements.

Prepare the same form for each local economic enterprise/public utility.
83

LBP Form No. 8


STATEMENT OF FUND OPERATION
Budget Year: ____________________
Province/City/Municipality: _______________
FUND/SPECIAL ACCOUNT:

Particulars
Account
Code
General
Public
Services
Social
Services
Economic
Services
Other
Servic
es
TOT
AL
(1) (2) (3) (4) (5) (5) (6)
I. Beginning Cash Balance




II. Receipts:




Total Available Resources for Appropriations
(I+II)









III. Expenditures




A. Current Operating Expenditures




1. Personal Services
Salaries and Wages Regular
Salaries and Wages Others
Personnel Economic Relief Allowance
(PERA)
Additional Compensation (AdCom)
Representation Allowance
Transportation Allowance
Clothing Uniform Allowance
Year-end Bonus
Other Bonuses and Allowances
Honoraria
Life & Retirement Insurance
Contributions
PAG-IBIG Contributions
PHILHEALTH Contributions
ECC Contributions
Pension Benefits Regular
Retirement Benefits Regular
Vacation and Sick Leave Benefits
Other Personnel Benefits





2. Maintenance and Other Operating




Expenditure
Travel Expenses
Training and Scholarship Expenses
Water
Electricity
Fuel
Office Supplies Expenses
Hospital Supplies Expenses
Medical, Dental & Laboratory Supplies
Expenses
Fuel, Oil & Lubricants Expenses
Other Supplies Expenses
Postage and Deliveries
Telephone Expenses Landline
Telephone Expenses Mobile
Internet Expenses
Cable, Satellite, Telegraphs & Radio
Expenses




84
General/Janitorial Services
Security Services
Repair and Maintenance Buildings
and Other Structures
Repair and Maintenance Office
Equipment
Repair and Maintenance Furniture
and Fixtures
Repair and Maintenance Land
Transport Equipment
Subsidy to National Government
Agencies
Subsidy to Local Government Units
Other Subsidies
Donations
Confidential and Intelligence Expenses
Extraordinary & Miscellaneous
Expenses
Taxes, Duties and Licenses
Insurance/Reinsurance Premiums
Membership Dues & Contributions to
Organizations
Awards and Rewards
Indemnities and Other Claims
Advertising and Marketing Expenses
Printing Expenses
Rent/Lease Expenses
Representation Expense

B. Capital Outlay
Land
Land Improvement
Buildings and Other Structures
Office Equipment
Furniture and Fixtures
Books
Technical and Scientific Machinery
Equipment
Construction/Port Equipment
Hospital Equipment
Medical, Dental and Laboratory
Equipment
Land Transport Equipment
Public Infrastructures





C. Financial Expenses





Total Appropriations





Ending Balance = [(I+II)-III]





Certified Correct: Approved:


_____________________ _____________________ ______________________
LOCAL BUDGET OFFICER LOCAL ACCOUNTANT LOCAL CHIEF EXECUTIVE







85











































INSTRUCTIONS

The Statement of Fund Operation is a summary of the total estimates of revenues and
other receipts and appropriations covering the proposed expenditures of the budget
year.

Beginning cash balance shall be net of amounts earmarked for specific purposes (e.g.,
continuing appropriations, 20% Development Fund).

Under the expenditures portion, indicate all expenditures by sector/service, inclusive of
lump-sum appropriations for 5% Calamity Fund, 20 % Development Fund, Aid to
Barangays and Financial Expenses.

Deduct the total appropriations from the total available resources for appropriations to
arrive at the ending or unappropriated balance.

Prepare the same form for each local economic enterprise/public utility.


86












































LBP Form No. 9


STATEMENT OF FUNDING SOURCES
(SUPPLEMENTAL BUDGET)
Fiscal Year _____
__________________________
Province/City/Municipality

___________________________
Fund/Special Account

Particulars
Account
Classification
Amount
(1) (2) (3)
1.0 New Revenue Sources
Tax Revenue
Loan Proceeds (Borrowings)

2.0 Savings




3.0 Realignment/Reversion




Total Estimated Income




Certified Correct:

___________________ ___________________
Local Treasurer Local Accountant *
_____________ _____________
Date Date

*As recommended by COA
INSTRUCTIONS

1. The column under new revenue source shall be filled for Supplemental Budget funded from
new revenue source.
2. The column under savings shall be filled for Supplemental Budget funded from savings.
3. The column under Realignment/Reversion shall be filled for Supplemental Budget funded
from reversion or realignment.
4. Indicate under column 2 the account classification using the chart of accounts as prescribed
by COA.
5. Indicate under column 3 the appropriate amount for whatever funding source of the
Supplemental Budget.
6. The certification to be signed by the Local Treasurer and Local Accountant shall depend on
funding source (i.e., additional realized income, savings, new revenue measure/s,
realignment in times of public calamity) of the Supplemental Budget to be enacted.
87













































LBP Form No. 10



STATEMENT OF SUPPLEMENTAL APPROPRIATION

_________________________
Province/City/Municipality


Implementing
Office
Particulars/Purpose
Object of
Expenditure
Account
Code
Amount
(1) (2) (3) (4) (5)

















TOTAL APPROPRIATION
P______

Prepared: Approved:


______________________ ______________________
Local Budget Officer Local Chief Executive
INSTRUCTIONS

1. Indicate under Column 1 the implementing office of the item of appropriation.
2. Indicate under Column 2 the particulars/purpose of the appropriation and in Column 3 the
object of expenditure.
3. Indicate under Column 4 the appropriate account code using the chart of accounts as
prescribed by COA.
4. Indicate under Column 5 the amount corresponding to each purpose and object of
expenditures being implemented by the office concerned.
88

7.0 Illustrative Example of a Budget Call

Provincial/City/Municipal Budget Memorandum No. 1-2008
14 June 2008


TO: All Heads of Offices, Departments Heads, Chairman of the Committee on
Appropriations, Members of the Sanggunian and Others Concerned.


SUBJECT: Guidelines on the Preparation and Submission of Annual General Fund Budget of
Offices/Departments for Fiscal Year 2009


I. Purpose: This Budget Call for FY 2009 is issued primarily to prescribe guidelines to be
observed by offices/departments in the preparation of budget proposals consistent with the
Annual Investment Program for FY 2009 and the Local Government Code.

II. Objectives and Policy Guidelines:

1. Consistent with the approved AIP, the LGU shall focus its resources to the attainment of
the following general objectives:

1.1 To increase per capita income of constituents by 20%;

1.2 To provide accessibility in the delivery of basic services to all constituents of the
LGU; and

1.3 To provide full employment to poor urban residents.

2. For FY 2009, the LGU shall direct its resources towards increased agricultural
productivity; promote quality in the production of competitive products in the world and
domestic markets; and provide health, social, education services geared towards
promoting economic growth with equity to marginalized citizens.

3. To support the budget for FY 2009 the following fiscal policies and measures were
approved and endorsed by the Sanggunian:

3.1 Enhance tax collection efficiency by launching a vigorous tax info campaign
supported by an intensified tax collection effort.

3.2 Upgrade the scale of fees comparable with other LGUs belonging to the same class;
and

3.3 Finance the completion of the San Jose Bridge in Barangay Dita through borrowing
from the DBP in the amount of P3.1 M payable in 10 years at 10% per annum.







89


4. The allocation scheme of the net amount available for appropriation for FY 2009 shall be
based on the following priority:



Guidelines to be observed in the allocation of free resources:

1
st
Priority Expansion of existing services/facilities
2
nd
Priority Execution of new development projects
3
rd
Priority Increased personnel benefits of local personnel

III Receipts Estimates and Spending Ceiling:

The receipts estimates for FY 2009 are to be generated from the following sources:

Sources of Financing Amount
% ages to
Total
IRA
National Wealth
Local Tax Revenues
Operating and Misc. Income
Borrowings
Others (Grants and Sale of Fixed
Assets)
103,841
1,143
3,516
3,151
3,100

-
90.00%
1.00%
3.50%
2.80%
2.70%

-
114,751 100.00%
A. General Services Sector
Particulars
PS MOOE CO TOTAL
Office of the LCE
Sanggunian
Treasurer
Accounting Office
Budget
Planning and Development Office
Legal
General Services
1500
2500
800
300
300
300
200
200
500
500
500
200
100
200
100
100
500
100
300
300
100
100
100
14000
2500
3100
1500
800
500
600
400
14300
TOTAL
6100 2200 15400 23700




Priority Functional Activity
Amount
(P000)
Percent ages of
Total
1
2
3
4
5
Basic Services Operation
Support to Basic Service
Gen. Policy/Legislative
Development Projects
Statutory/Contractual
58.1
3.4
23.7
20.9
8.6
51%
3%
20%
18%
8%
114.7 100%
90


B. Social Services Sector

Particulars
PS MOOE CO TOTAL
Health Services
Day Care
Social, Welfare and Development
Population Development
5100
1000
4000
1500
4000
500
3000
2000
1000
-
1400
1000
10100
1500
8400
4500
TOTAL
11600 9500 3400 24500

B. Economic Services Sector

Particulars
PS MOOE CO TOTAL
Engineering
Assessor
Agricultural Services
Environment and Natural
Resources
Development of Cooperatives
Veterinary Services
3500
1500
3500
2500

2500
5500
2000
1500
1500
1000

500
3400
24600
-
10500
1500

-
1000
30100
3000
15500
5000

3000
9900
TOTAL
19000 9900 37600 66500

GRAND TOTAL 36700 21600 56400 114700

Budget Calendar and Budget Preparation

1. All concerned are enjoined to follow the schedule as directed in the memorandum, particularly
on the submission of budget proposals at designated inclusive dates and on the prescribed forms
herein attached.
Schedule of Activities
Activity Inclusive Dates

1.1 Budget Call Issuance June 17
1.2 Budget Workshop on Budget Call June 24 28
1.3 Preparation/Submission of Budget Proposal July 1 15
1.4 Technical Budget Hearing Aug.16 Sept. 15
1.5 Consolidation of Budget Proposal Sept. 16 30
1.6 Budget Message, Local Expenditure
Program and BESF Preparation Oct. 1 15
1.7 Submission of Executive Budget Oct. 16




91

2. The Budget Preparation forms to be submitted together with other documents are:

2.1 Local Budget Preparation Form No. 1 - To be prepared/certified by
- Statement of Receipts LFC

2.2 Local Budget Preparation Form No. 2 - To be prepared/certified by
- Statement of Receipts & Expenditures Local Treasurer and,
Local Budget Officer (LBO)

2.3 Local Budget Preparation Form No. 3 - To be prepared by Office/
- Programmed Appropriation Department Head
and Obligation by Object

2.4 Local Budget Preparation Form No. 3A - To be prepared by LBO
- Consolidated Programmed Appropriation Department Head
and Obligation by Object

2.5 Local Budget Preparation Form No. 4/ - To be prepared by Office/
- Personnel Schedule Department Head

2.6 Local Budget Preparation Form No. 5 - To be prepared by Office/
- Financial Statement, Objectives & Expected Department Head
Results

2.7 Local Budget Preparation Form No. 6 - To be prepared/certified
- Statement of Debt Service by Local Accountant

2.8 Local Budget Preparation Form No. 7 - To be prepared/certified
- Statement of Statutory/Contractual Obligation by the LFC
and Budgetary Requirements

2.9 Local Budget Preparation Form No. 8 - To be prepared/certified
- Statement of Fund Operation by the Local Budget Officer
and Local Accountant

2.10 Organizational structure of the implementing - To be prepared by
office Office/Department Head

2.11 Proposed special provisions/operating policies - To be prepared by
to be incorporated in the Executive Budget. Office/Department Head

3 These budget preparation forms (LBP Form Nos. 3, 3A, 4 and 5) and documents
(organizational structure, staffing summary, and special provisions) shall be submitted to
the LFC, thru the Local Budget Officer, on or before August 15 for consolidation and
review.

4 Any queries, clarificatory questions, issues and observations relative to these guidelines
shall be referred at once to the Local Finance Committee for resolution during the budget
workshop. Technical and other assistance in the preparation of the 2009 Annual Budget
may be requested from the Local Budget Officer.

Please be guided accordingly.

Local Chief Executive

92
8.0 Illustrative Example of a Local Expenditure Program (LEP)

1. The LEP starts with a Title Page which provides a central theme or thrust for
the budget year.




























































A Budget for Unity Amidst Diversity




LOCAL EXPENDITURE PROGRAM
January 1 to December 31, 2009













Municipality/City/Province of ___________________________





Official Seal
93


2. The second page is a location map of the LGU indicating its population and
land area.

3. The Table of Contents follows the location map. The contents shall start with a
general introduction, followed by the details of the receipts program and the
expenditure component.

4. The general introduction summarizes briefly the Receipts Program for the
budget year and the Expenditure Program. A snap-shot analysis of the receipts
structure shall disclose the proportionate share of the receipts of the LGU as
against its IRA share. It shall also reveal the level of expenditures and will
show what sector (economic, social, general public services) got the lions
share of the budget in the past year, current year, and as proposed for the
budget year.

Fiscal policies for the budget year in both receipts and expenditures are
discussed and explained in the introductory part of the LEP.

PART 1. This is the first part of the LEP where the receipts indicated in LBP Form
Nos. 1 and 2 are reflected as major sources of funds. These sources, declared
as realistic and probable to be collected, include funds from new tax measures,
borrowings, etc. which are supported by ordinances from the Local Sanggunian
authorizing the collection and loan negotiation. The Receipts Program is
presented in the following tables.

Table 1
RECEIPTS PROGRAM
FY 2007-2009
(In 000 Pesos)

Receipts
Past
Year
Receipts
(Actual)
Current
Year
Receipts
(Actual/
Estimate)
Budget Year
Receipts
Estimate
LFC
Final
Recommendation
1. Receipts:
A. Local (Internal) Sources
1. Tax Revenue
a. Real Property Tax
b. Special Education Tax
c. Other Local Taxes
Total Tax Revenue
2. Non-Tax Revenue
a. Regulatory Fees
1. License Fees
2. Permit Fees
3. Other Fees
b. Business and Service Income
c. Other Income/Receipts
94

Total Non-Tax Revenue

B. External Sources
2. Shares from National Internal Revenue
Taxes (IRA)
2. Share from GOCCs
4. Other Shares from National Tax
Collections
a. Share from Ecozone
b. Share from EVAT
c. Share from National Wealth
d. Share from Tobacco Excise Tax
4. Extraordinary Receipts
a. Grants and Donations
b. Other Subsidy Income
5. Inter-local Transfers
a. Subsidy from LGUs
b. Subsidy from Other Funds
6. Capital/Investment Receipts
a. Gain on Sale of Assets
b. Gain on Investments
C. Receipts from Loans and Borrowings
Total Receipts

Total Available Resources for Appropriation

PART 2. The Expenditure Program is presented by Office or Department. Each
Office shall have the following expense structure:
Functional Statement, Objectives and Expected Results
Proposed New Appropriations Language for the Budget Year
Obligations by Object of Expenditure
Personnel Schedule

(These data shall be taken from LBP Forms No. 3, 4, 5)

A special provision is included for every presentation of the expenditure
program which outlines the purpose and manner of utilization of the
appropriated funds. Existing guidelines of COA and DBM relative to fund
utilization shall be the mother guidelines for all transactions.

A sample format of the expenditure program is shown below:

Office of the Mayor

A. Functional Statement

1. Exercise general supervision and control over all programs, projects and
activities of the municipal government.

95

2. Enforce all laws and ordinances pertinent to the effective governance of the
municipality.

B. Objectives

1. Formulate policy guidelines relative to the efficient and effective
implementation of all the programs, projects and activities of the municipal
government and shall be responsible to the Sanggunian Bayan.

2. Direct the implementation of municipal plans and project as indicated in the
Annual Investment Plan.

3. Provide extension services in planning and budgeting to all barangays in the
municipality.

4. Deliver public assistance services to all marginalized constituents, farmers,
fisher folks, disadvantaged women, disabled and elderly folks.

5. Provide consultative services to all punong barangays on local governance.

6. Implement the rehabilitation of El Nido Bridge in barangay San Isidro
under the Annual Investment Program.

C. Projects/Activities (000)

AIP Implementation
CODE Activities/Projects Cost Output Indicator Target Schedule
REF. From To
10.1 1. General Administrative and
Support services
3,200 Policy guidelines
formulated 10 1/1/2009 12/31/2009
Projects implemented
20 1/1/2009 12/31/2009
10.1.1 2. Extension services in
Planning and Budgeting
1,500 Training Conducted
16 3/1/2009 10/15/2009
10.1.2 3. Public assistance Services 1,600 Assistance provided

Farmers
50 1/1/2009 12/31/2009
Fisher folks
15 *do* *do*
Disabled
5 *do* *do*
Elderly
20 *do* *do*
Squatters
18 *do* *do*
10.1.3 4. Consultative Services to
All Barangays
1,000 Punong Barangays
trained 16 1/1/2009 12/31/2009
10.1.4 5. Rehabilitation of El Nido
Bridge in Barangay San
Isidro
800 El Nido Bridge
Rehabilitated
1 4/15/2009 8/15/2009
TOTAL 8,100

D. Proposed New Appropriation Language

96

For general administration and support service, Office of the Mayor, extension
offices, public assistance services, and implementation of locally-funded
projects.P8,100,000

New Appropriations by Program/Project

Current Operating Expenditures
Programs/ Projects/ Activity Personal Maintenance & Capital TOTAL
Services Other Operating Outlay
Expenses
A. Programs
I. General Administration Services
a. General Administration & 1200 1000 1000 3200
Support Services, Sub-total 1200 1000 1000 3200
II. Operations
a. Extension Offices 1200 300 1500
b. Public Assistance Services 1500 100 1600
c. Consultative Services 700 300 1000
Sub-total Operations 3400 700 4100
TOTAL Programs 4600 1700 1000 7300
B. Projects
I. Locally Funded Project
a. Barangay Development Project 800 800
Sub-total Project 800 800
Total New Appropriations 4600 2500 1000 8100

Programmed Appropriation and Obligation by Object
(In Thousand Pesos)
Account Past Year Current Budget
Object of Expenditure Code 2007 Year 2008 Year 2009
(Actual) (Estimate) (Estimate)
PERSONAL SERVICES
Salaries and Wages - Regular 701 1200 1600 1600
Salaries and Wages Others 706 1000 500 300
Personnel Economic Relief Allowance (PERA) 707 100 200 200
Additional Compensation (ADCOM) 708 100 200 200
Representation Allowance 710 40 150 150
Transportation Allowance 711 40 300 300
Clothing and Uniform Allowance 712 50 200 250
Honoraria 713 10 100 100
Year End Benefit
714 1000 1050 800
Cash Gift 714 50 50 50
Other Bonuses and Allowance 719 30 50 50
Life & Retirement Insurance Contribution 721 400 500 1000
PAG-IBIG Contributions 722 30 50 50
PHILHEALTH Contributions 723 20 30 30
ECC Contributions 724 30 20 20
Vacation and Sick Leave Benefits 737 210 308 500
TOTAL PERSONAL SERVICES 4510 5308 5600

MAINTENANCE & OTHER OPERATING
EXPENSES
Travel Expenses 766 1000 1442 120
97

Training and Scholarship Expenses 767 50 100 15
Telephone Expenses - Landline
Telephone Expenses - Mobile
773
774 30 40 10
Postage and Deliveries 772 5 25 5
Subscription Expenses 796 3 5 3
Rent/Lease Expense 786 5 10 10
Office Supplies Expenses 751 1000 1200 550
Fuel, Oil & Lubricant Expenses 757 300 350 250
Repairs & MaintenanceLand Transport Equipment 814 227 300 100
Repairs & Maintenance-Office Equipment 807 50 50 50
Repairs & Maintenance-Buildings and Other Structures 804 30 30 30
Donations 841 100 100 50
Representation Expense 782 50 50 20
Confidential and Intelligence Expenses 794 40 40 15
Other Professional Expenses 845 800 600 472
TOTAL MOOE 3690 4342 1700
PROPERTY PLANT & EQUIPMENT
Office Equipment 207 500
Technical and Scientific Machinery Equipment 218 500
Land Improvements 202 3800
TOTAL PROPERTY PLANT & EQPT. 4800
TOTAL APPROPRIATIONS 8200 9650 12100

D. Personnel Schedule


Office of the Mayor
Ordinance
/Item
Number
Position
Title
Name of
Incumbent
Current Year
Authorized
Rate/Annum
Budget Year
Proposed
Rate/Annum
Increase/
Decrease
Grade/
Step
Amount
Grade/
Step
Amount
(1) (2) (3) (4) (5) (6) (7) (8)

















PART 3. The following Special Purpose Appropriations are reflected in the LEP:

5% Calamity Fund
20% Development Fund (to be supported with an AIP
Authorized for the purpose)
Aid to Barangays
Others as may be authorized

Each of these funds shall have its own presentation of the following:

98

Proposed New Appropriations Language for the Budget Year
Obligations by Object of Expenditure
Special Provisions on the Use of Funds

PART 4. General Provisions. This portion of the LEP provides general guidelines
on the receipts and expenditure program for the budget year which shall be
consistent with existing operating guidelines of COA, DBM, DILG and
CSC.

PART 5. This last portion of the LEP summarizes the proposed appropriations by
office & lump-sum funds of the Municipal Annual Budget. Its title shall
be: SUMMARY OF THE FY 2009 NEW APPROPRIATIONS


















99



9.0 Illustrative Example of a Budget Message

Republic of the Philippines
Province/City/Municipality of _______________


B B U U D D G G E E T T M M E E S S S S A A G G E E

___(Date)___


The Honorable Members
Sangguniang Panlalawigan/Panlungsod/Bayan

Gentlemen:

May I submit the proposed Annual Budgets for FY 2009 of the
Provincial/City/Municipal Government for both the General Fund and Operation of
Economic Enterprise pursuant to Section 318 of RA 7160.
A. I NTRODUCTI ON

This Executive Budget was prepared after a thorough deliberation with all
concerned offices/departments and interested citizens to make it an effective tool for
equitably allocating the limited resources of government to the different sectors, thus
making the Budget an instrument for the economic and social upliftment of our
people. We have substantially committed funds for the programs, projects and
activities needed for an efficient and effective delivery of the basic services
enumerated in the Local Government Code.

It is important to stress at this point that the preparation of this Budget has been
open to the public through private sector representation to make decisions more
participative and democratic. This is also in keeping with governments thrust for
transparency and accountability in the budget-making processes. We take full
cognizance of the significant roles demonstrated by non-government organizations,
other private sector associations, and the general public in the planning and pre-budget
preparation stage by way of their membership in the Local Development Council
Executive Committee.

In particular, they took active part in the review of the visions and goals in the
Provincial/City/Municipal Development Plan and the prioritized projects in the
Medium-Term Provincial/City/Municipal Development Investment Program to
100

address current needs and provide inputs to the formulation of the Annual Investment
Program. These programs have been duly approved by the honorable members of the
Sanggunian under Resolution No. 4004.


This Budget integrates the Provincial/City/Municipal Development Plan into the
expenditure program by proposing only those projects which have been ranked as top
priority in the AIP.

The balanced General Fund Budget for FY 2009 is composed of the Expenditure
Program and Sources of Financing, both amounting to P114,750,761. It means a per
capita spending of P614, a moderate increase compared to the current years per capita
of P557. The Expenditure Program and Sources of Financing are illustrated in
Exhibits 1 and 2

Exhibit 1

















Exhibit 2













DISTRIBUTION BY TYPE OF REVENUE
Budget Year
(in million pesos)
76%
17%
2%
1%
3%
1%
IRA P87.00M
Operating & Misc. Rev. 1.58
Borrowings 3.10
Hospital Income 1.58
Local Taxes 19.08
Transf. Fr. Eco. Ent. 2.00

EXPENDITURE PROGRAM
(Distribution by Sector)

Budget Year
(in million pesos)


33%
1%
34%
1% 9%
2%
1%
19%
Health, Nutrition, Population
P37.3M
Soc. Sec. And Welfare 0.7
Economic Services 37.2
Reserve for Calamity
1.4
Gen. Public Services
21.3
Aid to Barangays 0.8
Reserve for Salary Stand'n
9.4
Debt Servicing 2.3
101

B. GOALS AND OBJ ECTI VES

The province/municipality expects to attain the following objectives during the plan
period:
Increase per capita income by a stated realistic percentage
Provide accessibility to all basic needs and services
Realistic percentage of citizens/constituents of the province
Provide expanded employment opportunities to the urban poor residents; and
Increase agricultural productivity and enhance delivery of health care
services.

C. FI SCAL POLI CI ES

Revenue-generating measures include enhanced tax collection via a vigorous
tax information campaign and intensified tax collection effort.

Exhibit 4 shows the trend of expenditures for FY 20__ to FY 20__. The
Health, Nutrition and Population Control Sector has registered sizeable increases for
the three-year period. This is attributed to the absorption of devolved health services.
Expenditure for Economic Sector has also been increasing due to the provision of
more infrastructure projects and bigger allocation for the agriculture sub-sector.

Exhibit 4



















36
26.3
30.2
3.2
2.4
0.8
29
31.5
35.1
4.6
2.48
0.8
21.3
37.3 37.2
5.5
2.4
9.5
0.8
0
5
10
15
20
25
30
35
40
GPS HNPC ESR RC DS RSS AB
EXPENDITURE PROGRAM BY SECTOR
Comparative Trend, 20__ to 20__
(in millions)

Past Year Current Year Budget Year
102

D. Distribution by Functional Activity

It has been long recognized that in order for a local government unit to achieve
efficient and effective operation, it should aim for the improvement of the ratio of its
overhead costs to cost of production and service delivery. Thus, it is important to
present in this Message, through the chart below, the direct cost of public goods and
services produced and delivered vis--vis its associated cost. This presentation slices
the budget pie on the basis of functional activity

Exhibit 5














The distribution of the LGU budget (Exhibit 5), shows that P58,092,677 or 51% is
allocated for the operation of frontline services; P3,441,320 or 3% is provided support
to frontline services; P26,888,301 or 18% will be spent for development projects;
P23,671,197 or 20% is provided for General Policy, Administration and Finance
Services; and P8,657,266, representing 8% of the total budget will be for Other
Purposes (Aid to Barangays, Reserve for Calamity and Debt Service).
E. DISTRIBUTION BY MAJOR EXPENSE CLASS
Personal Services
The total expenditures for Personal Services for the budget year is P50,138,976
inclusive of the provision for Salary Standardization of P9,418,928. Total Personal
Services accounts for 44% of the total LGU budget.
Maintenance and Other Operating Expenses
The amount of P34,687,449 has been set aside for MOOE, representing 30% of
the budget.

Capital Outlays
Expenditures for Capital Outlays will amount to P23,628,361 or 21% of the
total expenditures. It includes provisions for development projects, Loan Outlay,


51%
21%
7%
18%
3%
DISTRIBUTION OF LGU BUDGET By Functional Activity
Budget Year
(in million pesos)
Front line services
P58.1M
Gen. Policy, Adm./Fin.
23.7
Other Purposes
8.6
Projects
20.9
Support to FLS
3.4
103

Livestock and Crops Outlays, Equipment Outlays in the amounts of P20,288,000,
P2,361,291, P879,070 and P100,000, respectively. The amount of P20,288,000 for
development projects include P16,800,000 funded from the 20% Development Fund.
Other Purposes
The amounts of P5,479,975 and P816,000 are set aside as reserve for Calamity
and Aid to Barangays, respectively.

F. OPERATION OF ECONOMIC ENTERPRISE

The proposed Budget for the Operation of Economic Enterprise (Operation of
Telephone Service) in FY 20__ shall be sourced from the estimated Telephone
Service Income of P33,400,000 allocated as follows:

Particulars
Amount (P) % to Total
Personal Services
Maintenance and Other
Operating Expenses
Capital Outlays
Transfer to General Fund
Debt Servicing
5% Reserve
Unappropriated Balance
7,600,000

3,420,000
7,980,000
6,000,000
6,200,000
1,670,000
530,000
22

10
24
18
19
5
2
T O T A L
33,400,000 100

CONCLUSI ON

Submitted together with this Message are the Local Revenue and Expenditure
Program and the Budget of Expenditures and Sources of Financing (Table 1 to 9).

Gentlemen of the Sanggunian, this budget proposal manifests our
determination to lay a strong foundation for a greater and progressive
province/city/municipality. Let us join our hands together as we go about our mission
of providing a brighter future for our constituents.

Very truly yours,

______________________________________
PROVINCIAL GOVERNOR/CITY MAYOR/
MUNICIPAL MAYOR



10.0 Technical Notes on Budget Preparation
104
AREA SERVED (500 pre-schoolers) = 25%
SERVICE GAP (1,500 pre-schoolers) = 75%
100%

In evaluating the targets for the budget year the following guide questions are
suggested:

1. What are the mandated regular activities of the department?

1.1 Are these activities within the mandated function of the
office/department? If there are activities which do not contribute to
the mandate of the office, these shall be subjected to further review
for possible discontinuance or to challenge the rational of their
continued implementation. If the basis is doubtful then these
activities may be recommended for abolition. It is possible that
activities recommended for abolition may not be fully implemented
during the budget year. One option is to reduce targets to show
their minimal contribution to the realization of the overall mandate
of the office/department.

1.2 What is the total service area of the office/department? Service
area means the identified geographical location of the area and the
people to be served or benefited by the service. It may be people-
based service areas catering to a number of marginalized farmers,
families, malnourished children, senior citizens, differently-abled
persons, disadvantaged women, pre-schoolers, out-of school youth,
unemployed, etc. They are the target beneficiaries in reducing
poverty. It can be also an asset-based service area expressed in
terms of road density, irrigated land, forested area, mining and
water resources and other physical assets of the service area which
will provide the LGU a strong economic base in promoting growth.

The purpose of determining the total service area is to identify the
service gap. The service gap is the difference between the total
service area and clientele served. It could also mean the area that is
not served due to budget constraints. This is illustrated by the
following examples:

A. People-based service area







SERVICE AREA
(No. of Pre-schoolers)
2,000

25%
75%
SERVICE GAP
105
100%
B. Asset-based service area

Total Land Area (Palay Production) . . . . 200 Hectares (100%)
Less: Irrigated Area . . . . . . . . . . . . . . . . 150 Hectares ( 75%)
Non-Irrigated Area (Service Gap) . . . . . . 50 Hectares ( 25%)

If the objective for the budget year is to maintain its present share
of providing services/goods to its existing clientele, then its current
budget will have to be maintained for the budget year, plus
adjustments due to inflation. A substantive increase in the budget
will mean an increase in the clientele to be served or reducing the
service gap. Please see illustration below:










2. Estimate Costs for the Budget Year These are two primary costs to be
estimated for the budget year: the current operating expenditures and
capital outlays. The current operating costs refer to the cost of providing
services/goods delivery to its target clientele or service area primarily for
the implementation of the regular activities of the office or department.
Capital outlay costs refer to the costs of procuring civil works projects or
the acquisition of equipment to facilitate or enhance delivery of goods or
services.

Cost of doing regular activities:

There are two (2) approaches in costing regular activities of the
office/department: the Per Capita Cost and the Fixed and Variable
Costing methods.

Per Capita Cost

Per Capita Cost is simply the total cost of doing an activity (direct labor
and direct materials + overhead or administrative expenses) divided by
the total number of beneficiaries/clientele.

25%
75%
SERVICE GAP
25%
55%
20%
SERVICE GAP
SERVICE AREA AREA SERVED
for Current Year
AREA TO BE SERVED
for Budget Year
25% + 20% = 45%
106
Direct Labor + Direct Materials + Overhead Expenses
Per Capita Cost = ---------------------------------------------------------
Total Clientele Served

Where : Direct labor cost refers to all cost in personal services that is
directly incurred in delivering/rendering the goods or services.

Direct materials cost refers to direct supplies/materials used in
delivering or rendering the services.

Overhead expenses refer to the cost of supervision or
administration and all attendant costs that are indirectly incurred
while providing the delivery of goods and services.


For example:

What is the cost per capita in providing primary health care services at
the municipal level?

Assume that:

Annual PS cost of Rural Health Physician
and a Nurse II . . . . . . . . . . . . . . . . . . . . . . . P 500,000
Annual MOOE cost for supplies & medicine . . . . 200,000
Annual Overhead expenses for office supplies
and materials, light, water, gasoline,
communication, repair of motor vehicles. . . 100,000
TOTAL COST P 800,000
Number of clientele/patients served per annum - 2,000

____800,000__
2,000

For budgeting purposes, the per capita cost becomes the benchmark in
computing the cost of providing primary health care services if ever the
clientele is increased or decreased. If the clientele or service area is
increased to 1000 then the budgetary requirements would be (P400x
3000) or P 1,200,000. If it is decreased by 1000, the budget would be
(P400 x 1000) or P400,000.

Per Capita Cost =
= P 400/patient/clientele
107
To comply with the budgetary ceiling, it is suggested that the target
clientele shall, as much as possible, be matched with available resources
when compared with the cost per capita.

Fixed and Variable Costs

The disaggregation of the current operating expenditures into fixed and
variable costs that will match with the target output is the main purpose
of this costing technique.

What are fixed costs? These are current operating costs that do not vary
or change regardless of the number of output indicators or of the
goods/services produced/delivered or rendered.

Examples of fixed costs:

Salaries and Other Personnel Services
Cost of Providing General Administrative and Support Services
Rent
Utility Expenses
Taxes, Insurance and Other Fees
Subscription Expenses

What are variable costs? These are current operating costs that vary or
change proportionately with the increase or decrease in output.

Examples of variable costs:

Wages of Regular Employees and Laborers
Supplies and Materials
Traveling Expenses
Communication Expenses
Representation Expenses
Transportation & Delivery Expenses
Storage Expenses
Repair & Maintenance of Government Facilities

For budgeting purposes, it is important to consider the total cost of
producing the goods or services (Fixed Cost + Variable Cost) that will
match with the available resources or budgetary ceiling.



108
For example given the following data:

Total Fixed Cost = 500,000
Total Variable Cost = 200,000
Total Cost = 700,000
Output = 100,000

Budget ceiling for the budget year is P1M. First, compute for the
variable cost per unit or 200,000/1000 = 200/unit Second is compute the
total cost on the basis of the budget ceiling.

Total Cost = 500,000 + 200 (x)
200x = 500,000 or x = 500,000 = 2,500 units
200
Total Cost = 500,000 + 200 (2,500)
Total Cost = 500,000 + 500,000
Total Cost = 1,000,000

The computation above shows the relationship between the budget ceiling
and the target output. It gives the department head a choice to increase
the target, maintain the status quo, or increase the target but reduce cost
to optimize available resources. This is illustrated in graphical form as:




If the budget ceiling is limited to P700,000 then the total cost is:

Total Cost = P500,000 + 200 (1000) = 500,000 + 200,000
= 700,000
Variable Cost (200) (2,500)
P500,000
Fixed Cost
P500,000
Output/unit
Total Cost (00,000)
109



Estimating cost for Capital Outlays shall use current market prices (labor
and materials) for civil works projects plus provision for cost overruns or
price escalation. Cost estimates based on feasibility studies shall be
updated and validated for more realistic costing.




















Variable Cost = (P200,000)
= (200)(1000)
Fixed Cost (P500,000)
Output/unit
Total Cost (00,000)
110


Chapter 2. Budget Authorization


1.0 Introduction

2.0 Legal Basis of Budget Authorization

3.0 Key Players in Budget Authorization

4.0 The Budget Authorization Flow Chart

5.0 Steps in the Budget Authorization Phase
Step 1. Enact the Appropriation Ordinance
1.1 Check the Budget Documents Submitted
For Annual Budget
For Supplemental Budget
1.2 Evaluate the Budget
The Receipts Portion of BESF Table No. 1
The Expenditures Portion of BESF Table No. 1
1.3 Deliberate on the Budget
Presentation of the Executive Budget
to the Sanggunian
Deliberation Proper (with Guide Questions
for Deliberation)
1.4 Authorize the Annual Budget
Contents of the Appropriation Ordinance
Rules Governing the Enactment
of an Appropriation Ordinance
Limitations on Legislative Action
Failure to Enact the Annual Appropriations
o The Reenacted Budget
Step 2. Approve the Appropriation Ordinance
Approval by the LCE
Veto by the LCE
o Veto Power of the LCE
o Override of the Veto




111





Step 3. Submit the Appropriation Ordinance for Review

6.0 Changes in the Annual Budget
6.1 Supplemental Budget
6.2 Use of Appropriated Funds and Savings

7.0 Effectivity of Budgets
Effectivity of the Annual Budget
Effectivity of the Supplemental Budget
Posting Requirement

8.0 Local Budget Authorization Forms
LBA Form No. 1A - Checklist on Documentary
and Signature Requirements for the Annual Budget
LBA Form No. 1B - Checklist on Documentary
and Signature Requirements for the Supplemental Budget

9.0 Illustrative Example of Ordinance Authorizing the Annual
Appropriations

10.0 Sample Formats
10.1 Ordinance Authorizing the Supplemental Appropriations
10.2 Approval Letter of the LCE
10.3 Veto Message
10.3.1 Partial Veto
10.3.2 Total Veto
10.4 Ordinance Authorizing Use of Savings and Augmentation









112
Budget Authorization Phase

1.0 Introduction

Budget authorization is the second phase in the local budget process.
This legislative function of enacting the ordinance authorizing the budget
is in accordance with the fundamental principle that no money shall be
paid out of the local treasury except in pursuance of an
Appropriation Ordinance or law. This phase starts from the time the
Sanggunian receives the executive budget submitted by the LCE and ends
with the enactment of the Appropriation Ordinance and approval thereof
by the LCE.


2.0 Legal Basis









3.0 Key Players in Budget Authorization

3.1 Local Chief Executive The LCE shall submit the executive
budget to the Sanggunian for authorization (Section 318, R.A. No.
7160). After the enactment of the Appropriation Ordinance, the
LCE shall approve or veto the same (Sections 54 and 55, R.A. No.
7160).

3.2 Sanggunian - As the legislative body of the LGU, the Sanggunian
shall authorize annual and supplemental budgets for the general
welfare of the locality and its inhabitants (Sections 447, 458 and
468, R.A. No. 7160).

The Sanggunian may, by ordinance, authorize the LCE or the
Presiding Officer of the Sanggunian to augment any item in the
approved annual budget for their respective offices from savings in
other items within the same expense class of their respective
appropriations (Section 336, R.A. No. 7160; Article 454 [b], IRR of
R.A. No. 7160).
On or before the end of the current fiscal year, the Sanggunian
concerned shall enact, through an ordinance, the annual budget of the
local government unit for the ensuing fiscal year on the basis of the
estimates of income and expenditures submitted by the local chief
executive (Section 319, R.A. No. 7160).
113

3.3 Committee on Appropriations/Finance The Committee on
Appropriations/Finance, as one of the standing committees of the
Sanggunian, shall be responsible for conducting a preliminary
review and evaluation of the executive budget. It shall submit its
report and recommendation to the Sanggunian proper.

3.4 Secretary to the Sanggunian The Secretary to the Sanggunian
shall stamp the Appropriation Ordinance with the seal of the
Sanggunian and record the same in a book kept for the purpose.
He shall affix his signature to the enacted Appropriation Ordinance
and present the same to the Presiding Officer for the Presiding
Officers signature and forward copies thereof to the LCE for
approval. Subsequently, he shall forward copies of the duly
approved Appropriation Ordinance to the reviewing authority
(Section 469, R.A. No. 7160).

The Secretary to the Sanggunian shall cause the posting of an
ordinance or resolution on the bulletin board at the entrance of the
provincial capitol, or city or municipal hall, as the case may be, and
in at least two (2) conspicuous places in the LGU not later than five
(5) days after approval thereof (Section 59 [b], R.A. No. 7160).

3.5 Local Finance Committee The LFC shall assist the Sanggunian
in the analysis and review of the annual and supplemental budgets
to determine compliance with statutory and administrative
requirements (Section 316 [g], R.A. No. 7160).

3.6 Heads of Departments and Offices - Upon request of the
Sanggunian, Heads of Departments and Offices shall appear before
the body or the Committee on Appropriations/Finance to explain or
justify their proposals.


4.0 The Budget Authorization Flow Chart

The budget authorization flow chart below (Figure 11) shows the
sequence of activities from the time the LCE presents the Executive
Budget to the Committee on Appropriations/Finance until the approved
Appropriation Ordinance is posted and copies thereof are forwarded to
the reviewing authority.


114

Local Chief
Executive
Sanggunian
Local Finance
Committee
Heads of
Departments
and Offices
Presents the
Executive
Budget
Conducts a preliminary
review and evaluation
of the executive budget.
[Committee on
Appropriations/Finance]

Assists the
Sanggunian in the
analysis and review
of the annual and
supplemental budgets
Justifies their
budget
proposals
Deliberates on the
budget
Authorizes the Annual
Budget
Forwards the
Appropriation
Ordinance to the LCE
[Secretary to the
Sanggunian]
Vetoes the
Appro-
priation
Ordinance
Approves
the Appro-
priation
Ordinance
Overrides
the veto by
2/3 vote of
the majority
of all
members
Posts the
Appropriation
Ordinance and
forwards
copies thereof
to the
reviewing
authority
[Secretary to
the
Sanggunian]









































Figure 11. The Budget Authorization Flow Chart



115
5.0 Steps in the Budget Authorization Phase

There are three steps in Budget Authorization:

Step 1. Enact the Appropriation Ordinance

Section 319 of R.A. No. 7160 provides that On or before the end of the
current fiscal year, the Sanggunian concerned shall enact, through an
ordinance, the annual budget of the local government unit for the ensuing
fiscal year on the basis of the estimates of income and expenditures
submitted by the local chief executive.

1.1 Check the Budget Documents Submitted

Using the Local Budget Authorization (LBA) Form Nos. 1A and
No. 1B (Checklists on Documentary and Signature Requirements
for the Annual/Supplemental Budget), the Sanggunian, with the
assistance of the LFC, shall check if the following documents are
submitted for authorization:

1.1.1 For Annual Budget
(Please refer to LBA Form No. 1A on page 131)

Document Signatory
Budget Message LCE
Local Expenditure Program LCE
BESF
LFC
LCE

AIP
(Approved by the Sanggunian
through a Resolution)
Secretary to the Sanggunian
Presiding Officer
Personnel Schedule
HRMO
LCE

116
1.1.2 For Supplemental Budget
(Please refer to LBA Form No. 1B on page 132)

Document Signatory

Funds Actually Available:
Certified Statement of Additional
Realized Income
Certification of Savings


Local Treasurer and
Local Accountant*
Local Treasurer and
Local Accountant*
*As recommended by COA

New Revenue Measure/s:
Certified Statement of Income from
New Revenue Measure/s
Copy of duly enacted ordinance
which imposes new local taxes,
charges, fees, fines or penalties or
which raises existing local taxes,
charges, fees, fines or penalties
Copy of official communication
stating that the LGU is a recipient
of new or higher remittances,
contributions, subsidies or grants
in aid from the National
Government or from government
corporations and private entities


Local Treasurer and
Local Accountant*







*As recommended by COA

Realignment of Appropriations in Times
of Public Calamity:
Certificate of Source of Funds
Available for Appropriations




Local Treasurer
Local Accountant
LCE


117
1.2 Evaluate the Budget

The Sanggunian, with the assistance of the LFC, may refer to the BESF
to facilitate the evaluation of, and deliberation on, the executive budget in
terms of compliance with the budgetary requirements and general
limitations. The Summary of Receipts and Expenditures is checked for
specific purposes.

The Receipts Portion of BESF Table No. 1

To check the budget years aggregate estimated income which
will be compared with the aggregate expenditure program
(Section 324 [a], R.A. No. 7160);

To validate the amount of regular income for the budget year
that will serve as basis for computing the 20% ceiling for the
amount of appropriations for debt servicing (Section 324 [b],
R.A. No. 7160);

To validate the amount of regular income for the budget year
that will serve as basis for computing the 5% lump-sum
appropriation for unforeseen expenditures arising from the
occurrence of calamities (Section 324 [d], R.A. No. 7160);

To validate the amount of regular income realized in the next
preceding fiscal year (Past Year column) that will serve as basis
for computing the PS Limitation (Section 325 [a], R.A. No.
7160);

To verify the amount of actual receipts derived from basic real
property tax in the next preceding calendar year as basis for
computing the 2% ceiling of the annual appropriations for
discretionary purposes of the LCE (Section 325 [h], R.A. No.
7160); and

To validate the amount of the IRA for the budget year that will
serve as basis for computing the minimum 20% appropriation
for development projects (Section 287, R.A. No. 7160).





118
The Expenditures Portion of BESF Table No.1

To determine the overall level of appropriations by department/
office/unit and special purpose appropriations, and the overall
total;

To check the provisions for associated PS costs, e.g.,
PhilHealth, GSIS premiums, Pag-IBIG, PERA, AdCom, Year-
end Bonus and Cash Gift, RATA, etc.; and

To verify if the projects in the budget are consistent with the
AIP.

1.3 Deliberate on the Budget

The Sanggunian shall consider the executive budget as a priority measure
which shall take precedence over all other pending and proposed
measures. As a rule, all Sanggunian sessions shall be open to the public,
unless otherwise provided by law (Article 105 [b], IRR of R.A. No. 7160).

Presentation of the Executive Budget to the Sanggunian

On the first day of the deliberation on the executive budget, the
LCE may address the members of the Sanggunian to present the
thrusts, programs and priorities of the budget under consideration.
The LCE may likewise brief the Sanggunian on the level of
proposed expenditures; how these are allocated among the three (3)
mandated sectoral services, namely, economic, social, and general
services; and the sources of financing, i.e., revenues, other receipts,
and borrowings that will support the budget.

Deliberation Proper

The procedures observed in budget deliberation may vary from one
LGU to another depending on the Internal Rules of Procedure
adopted by the Sanggunian and the prevailing work linkages
between the LCE and the Sanggunian members.

The Committee on Appropriations/Finance may conduct its own
budget hearing and may call upon the LFC and Heads of
Departments and Offices during the preliminary review and
evaluation of the budget. The Committee then renders its report
and recommendation to the Sanggunian proper.
119

The LFC, in assisting the Sanggunian, shall:

Make available pertinent data to enable the Sanggunian and
the Committee on Appropriations/Finance to carry out a
more objective review and analysis of the proposed
expenditure program and its component activities, the
projected revenues and other sources of financing; and

Be present during committee hearings and Sanggunian
sessions as may be required by the legislative body to
explain any detail of the executive budget that the members
may wish to be clarified on.

The Heads of Departments and Offices, when requested to
appear before the Sanggunian to explain or justify their budgets,
shall present the following:

The objectives, functions and corresponding projects of the
department/office and their relevance to the total
development efforts of the LGU;

The nature of the work to be performed for each function,
project and activity measured in terms of expected results, as
well as the level of funding being proposed, including the
organizational setup/staffing modification, if any, and the
personnel complement tasked to perform the work; and

The accomplishment of the department/office for the
preceding fiscal year, particularly the extent to which it has
met its target.

The Sanggunian shall, among others, ensure that the provisions
on budgetary requirements and general limitations under R.A.
No. 7160 and other laws are strictly complied with in the
proposed budget.

During budget deliberation, the Sanggunian may use the
following guide questions, among others:

Is the budget consistent with the AIP?

120
Does the budget adequately provide funds for the delivery of
basic services and maintenance of facilities enumerated
under Section 17 of R.A. No. 7160?

Are the requirements of component LGUs considered and
equitably allocated for in the budget?

Is the proposed expenditure program within the
recommended ceiling for economic, social, and general
public services? Does the budget provide for a proper
balance among these various services?

Are the existing/proposed organizational structure and
staffing pattern designed and implemented taking into
consideration the service requirements and financial
capability of the LGU subject to the minimum standards and
guidelines of the Civil Service Commission (CSC) and the
provisions of R.A. No. 7160? Does the existing/proposed
complement have the capability to implement the plans and
programs and to deliver basic public services?

Are there some expenditures that need to be reduced to
ensure reasonable economy in local government operations?

Will some projects or activities need to be fast tracked,
and procedures to be simplified to maximize utilization of
resources?

Are the estimated revenues and other receipts of reasonable
probability of collection? Are the new tax and other revenue
measures proposed to finance the budget covered by tax
ordinances? Is the proposed borrowing or other credit
financing scheme within the capability of the LGU to pay?

1.4 Authorize the Annual Budget

After budget deliberation, the Sanggunian authorizes the annual budget
through an Appropriation Ordinance. (An illustrative example of an
ordinance authorizing the annual appropriations is shown on page 133).

An ordinance is enacted to cover legislative actions of a general or
permanent character (Article 107 [a], IRR of R.A. No. 7160).

121
An appropriation refers to an authorization made by ordinance directing
the payment of goods and services from local government funds under
specified conditions or for specific purposes (Section 306 [b], R.A. No.
7160).

Contents of the Appropriation Ordinance

The Appropriation Ordinance shall contain, among others, the
following:

An assigned number, a title or caption, an enacting or ordaining
clause, and the date of proposed effectivity (Article 107 [b],
IRR of R.A. No. 7160).

By department/office/unit and special purpose appropriation:

Functional statement, objectives and expected results
New Appropriations by PPA, by expense class and by object
of expenditure
General Provisions (if applicable)
Special Provisions (if applicable)

A summary of totals of the new appropriations by
department/office/unit

A provision identifying the budget documents appended to the
Appropriation Ordinance that will form part of the authorized
budget such as, but not limited to, the following:

BESF
AIP
Personnel Schedule by department/office/unit (LBP Form
No. 4 on page 79)
Others

A provision that the budget complies with the budgetary
requirements and general limitations provided under R.A. No.
7160.

A provision that any change in the budget shall be made in
accordance with Sections 321 and 336 of R.A. No. 7160 and
Article 417 (as amended by Administrative Order [A.O.] No. 47
122
dated 12 April 1993) and Article 454 of the IRR of the same
R.A.

Such other conditions as may be imposed by the Sanggunian to
ensure the effective implementation of the budget programs and
to institute adequate safeguards in the disbursement of local
funds

Rules Governing the Enactment of an Appropriation
Ordinance

The enactment of the proposed Appropriation Ordinance shall be
governed by the rules prescribed under Section 54 of R.A. No.
7160 and Article 107 of its IRR, as well as the Internal Rules of
Procedure adopted by the Sanggunian concerned. In summary, the
following may constitute the basic requirements and process of
enactment:

A majority of all the members of the Sanggunian who have
been elected and qualified shall constitute a quorum to transact
official business. Should a question of quorum be raised during
a session, the Presiding Officer shall immediately proceed to
call the roll of the members and thereafter announce the results
(Section 53, R.A. No. 7160; Article 106, IRR of R.A. No. 7160).

The proposed Appropriation Ordinance shall be accompanied
by a brief explanatory note containing the justification for its
approval (Article 107 [b], IRR of R.A. No. 7160).

The proposed Appropriation Ordinance shall be signed by the
author or authors and submitted to the Secretary to the
Sanggunian who shall report the same to the Sanggunian at its
next meeting.

However, if the proposed Appropriation Ordinance is certified
as urgent by the LCE, it may be presented to and considered by
the Sanggunian at the same meeting when it was first reported
to the Sanggunian, whether or not it is included in the calendar
of business without need of suspending the rules (Article 107
[b] and [e], IRR of R.A. No. 7160).

No ordinance shall be considered on second reading in any
regular meeting unless it has been reported out by the proper
123
committee to which it was referred, normally the Committee on
Appropriations, or certified as urgent by the LCE (Article 107
[d], IRR of R.A. No. 7160).

If the proposed Appropriation Ordinance is certified as urgent
by the LCE, it may be submitted for final voting immediately
after debate or amendment during the second reading (Article
107[f], IRR of R.A. No. 7160).

The Secretary to the Sanggunian shall prepare copies of the
proposed Appropriation Ordinance in the form it was passed
during the second reading and shall distribute to each
Sanggunian member a copy thereof for the third reading and
final consideration (Article 107 [f], IRR of R.A. No. 7160).

The proposed Appropriation Ordinance shall require the
affirmative vote of a majority of all the Sanggunian members
(that is, 50% plus one) for its passage (Article 107[g], IRR of
R.A. No. 7160).

The approved Appropriation Ordinance shall be stamped with
the seal of the Sanggunian and recorded in a book kept for the
purpose (Article 107 [h], IRR of R.A. No. 7160).

The Secretary to the Sanggunian shall affix his signature to the
enacted Appropriation Ordinance and present the same to the
Presiding Officer for his signature (Section 469 [c] [2], R.A.
No. 7160).

The Secretary to the Sanggunian shall forward the
Appropriation Ordinance enacted by the Sanggunian and duly
certified by the Presiding Officer to the LCE for approval
(Section 469 [c] [3], R.A. No. 7160).

Limitations on Legislative Action

The Sanggunian may not increase the proposed amount in the
executive budget nor include new items except to provide for
statutory and contractual obligations but in no case shall it exceed
the total appropriations in the executive budget (Article 415, IRR of
R.A. No. 7160).

124
Failure to Enact the Annual Appropriations (Section 323, R.A.
No. 7160)

In case the Sanggunian concerned fails to pass the ordinance
authorizing the annual appropriations at the beginning of the
ensuing fiscal year, the ordinance authorizing the appropriations of
the preceding year shall be deemed reenacted. The Sanggunian
shall continue to hold sessions, without additional remuneration for
its members, until the ordinance authorizing the annual
appropriations is approved, and no other business may be taken up
during such sessions (Article 415, IRR of R.A. No. 7160).

If the Sanggunian still fails to enact such ordinance after 90 days
from the beginning of the fiscal year, the preceding years budget
shall remain in force and effect until such time that the ordinance
authorizing the annual appropriations is passed by the Sanggunian
concerned (Article 415, IRR of R.A. No. 7160).

The Reenacted Budget

Only the annual appropriations for salaries and wages of
existing positions, statutory and contractual obligations, and
essential operating expenses authorized in the annual and
supplemental budgets for the preceding year shall be deemed
reenacted and disbursement of funds shall be in accordance
therewith (Section 323, R.A. No. 7160).

In the implementation of the reenacted ordinance, the local
treasurer concerned shall exclude from the estimates of
income for the preceding fiscal year those realized from
nonrecurring sources like national aids, proceeds from loans,
sale of assets, prior year adjustments, and other analogous
sources of income. National Aids shall not include the IRA
of LGUs and their shares in the utilization and development
of national wealth (Section 323, R.A. No. 7160; Article 415,
IRR of R.A. No. 7160).

In case the revised income estimates be less than the
aggregate reenacted appropriations, the local treasurer
concerned shall accordingly advise the Sanggunian
concerned which shall, within 10 days from receipt of such
advice, make the necessary adjustments or reductions. The
revised appropriations authorized by the Sanggunian
125
concerned shall then be the basis for disbursements (Section
323, R.A. No. 7160).

No ordinance authorizing supplemental appropriations shall
be passed in place of the annual appropriations (Section 323,
R.A. No. 7160).

Step 2. Approve the Appropriation Ordinance
The Appropriation Ordinance enacted by the Sanggunian shall be
presented to the LCE for approval, in which case, he shall affix his
signature on every page thereof (Sample Format No. 2 Approval Letter
of the LCE, page 139). Otherwise, he shall veto it and return the same
with his objections to the Sanggunian, which may proceed to reconsider
the same. A veto may be partial (Sample Format No. 3, page 140) or
total (Sample Format No. 4, page 141).

The veto shall be communicated by the LCE to the Sanggunian within 15
days in the case of a province, and 10 days in the case of a city or
municipality; otherwise, the ordinance shall be deemed approved as if the
LCE had signed it (Section 54 [b], R.A. No. 7160).

Veto Power of the LCE (Section 55, R.A. No. 7160)

The LCE may veto any ordinance on the ground that it is ultra
vires (that is, beyond the powers) or prejudicial to the public
welfare, stating his reasons therefore in writing.

The LCE, except the Punong Barangay, shall have the power to
veto any particular item or items of an Appropriation Ordinance, an
ordinance or resolution adopting a local development plan and
public investment program, or an ordinance directing the payment
of money or creating liability.

The veto shall not affect the item or items that are not objected to.

The vetoed item or items shall not take effect unless the
Sanggunian overrides the veto; otherwise, the item or items in the
Appropriation Ordinance of the previous year corresponding to
those vetoed, if any, shall be deemed reenacted.

The LCE may veto an ordinance or resolution only once.
126

Override of the Veto (Section 55 [c], R.A. No. 7160; Article 109 [c],
IRR of R.A. No. 7160)

The Sanggunian may override the veto of the LCE by two-thirds
(2/3) vote of all its members.

Such override will make the ordinance effective for all legal intents
and purposes even without the approval of the LCE.


Step 3. Submit the Appropriation Ordinance for Review

For component cities and municipalities, the Secretary to the
Sangguniang Panlungsod or Sangguniang Bayan, as the case may be,
shall forward to the Sangguniang Panlalawigan within three (3) days after
approval, copies of the approved Appropriation Ordinance for review in
accordance with Section 327 of R.A. No. 7160 (Section 56, R.A. No.
7160).

For provinces, highly urbanized cities, independent component cities and
municipalities within the Metropolitan Manila Area, the Secretary to the
Sangguniang Panlalawigan, Sangguniang Panlungsod, or Sangguniang
Bayan, as the case may be, shall transmit to the DBM within three (3)
days after its approval, copies of the approved Appropriation Ordinance
for review in accordance with Section 326 of R.A. No. 7160 (Section 56,
R.A. No. 7160 adopted as a policy).
















127
6.0 Changes in the Annual Budget

6.1 Supplemental Budget

General Rule

All budgetary proposals shall be included and considered in the budget
preparation process. After the LCE shall have submitted the executive
budget to the Sanggunian, no ordinance providing for a supplemental
budget shall be enacted (Section 321, R.A. No. 7160).

Exceptions

Changes in the annual budget may be done through supplemental budgets
under the following circumstances (Article 417, IRR of R.A. No. 7160 as
amended by A.O. No. 47):

6.1.1 When supported by funds actually available as certified
by the local treasurer

Funds actually available refer to the amount of money
actually collected, as certified by the local treasurer, at any
given point during the fiscal year, which is over and above
the estimated income collection for that point in the year.

Thus, funds are actually available when realized income
exceeds estimated income as of any given day, month, or
quarter of a given fiscal year.

Funds are likewise deemed actually available when there are
savings.

Savings refer to portions or balances as of any given point in
the fiscal year or any programmed or allotted appropriation
which remain free of any obligation or encumbrance and
which are still available after the satisfactory completion or
the unavoidable discontinuance or abandonment of the work,
activity or purpose for which the appropriation was
originally authorized, or which result from unobligated
compensation and related costs pertaining to vacant positions
and leaves of absence without pay.


128
6.1.2 If covered by new revenue source/s

New revenue source refers to money measure not otherwise
considered during the preparation and enactment of the
annual budget. Such new revenue measures include
ordinance passed by the Sanggunian during the fiscal year
but after the annual budget had already been enacted into
law which imposes new local taxes, charges, fees, fines or
penalties, or which raises existing local taxes, charges, fees,
fines or penalties.

Such revenue sources also include new or higher
remittances, contributions, subsidies or grants in aid from the
National Government or from government corporations and
private entities which have not been included in the
estimates of income which served as basis for the annual
budget.

6.1.3 In times of public calamity (Section 321, R.A. No. 7160;
Article 417, IRR of R.A. No. 7160, as amended by A.O. No.
47).

By way of budgetary realignment to set aside appropriations
for the purchase of supplies and materials or the payment of
services, which are exceptionally urgent or absolutely
indispensable to prevent imminent danger to, or loss of, life
or property, in the jurisdiction of the LGU or in other areas
declared in a state of calamity by the President.

In such case, the Appropriation Ordinance shall clearly
indicate the following:

The sources of funds available for appropriations as
certified under oath jointly by the local treasurer and the
local accountant and attested to by the LCE;

The items of appropriations affected; and

The reasons for the change.

Sample Format No. 1 on pages 135-138 illustrates an ordinance
authorizing supplemental appropriations.

129
6.2 Use of Appropriated Funds and Savings

General Rule

Funds shall be available exclusively for the specific purpose for which
they have been appropriated. No ordinance shall be passed authorizing
any transfer of appropriations from one item to another (Section 336, R.A.
No. 7160).

Exception

The LCE or the Presiding Officer of the Sanggunian may, by ordinance,
be authorized to augment any item in the approved annual budget for
their respective offices from savings in other items within the same
expense class of their respective appropriations {Section 336, R.A. No.
7160; (Article 454 [b], IRR of R.A. No. 7160)}.

Savings refer to portions or balances of any programmed
appropriation free from any obligation or encumbrance, still available
after the satisfactory completion or the unavoidable discontinuance or
abandonment of the work, activity or purpose for which the
appropriation is authorized, or arising from unpaid compensation and
related costs pertaining to vacant positions and leaves of absence
without pay (Article 454 [b] [1], IRR of R.A. No. 7160).

Augmentation implies the existence in the budget of an item, project,
activity or purpose with an appropriation which, upon implementation
or subsequent evaluation of needed resources, is determined to be
deficient (Article 454 [b][2], IRR of R.A. No. 7160).

Sample Format No. 5 on pages 142-143 illustrates an ordinance
authorizing the use of savings and augmentation.


7.0 Effectivity of Budgets

The ordinance enacting the annual budget shall take effect at the
beginning of the ensuing calendar year (Section 320, R.A. No. 7160).

An ordinance enacting a supplemental budget shall take effect upon its
approval or on the date fixed therein (Section 320, R.A. No. 7160).

130
Posting requirement and effectivity of Appropriation Ordinance
(Section 59, R.A. No. 7160; Article 113, IRR of R.A. No. 7160).

Unless otherwise stated in the ordinance or resolution approving
the local development plan and public investment program, the
same shall take effect after 10 days from the date a copy thereof is
posted on the bulletin board at the entrance of the provincial capitol
or city or municipal hall, as the case may be, and in at least two (2)
other conspicuous places in the LGU.

The Secretary to the Sanggunian shall cause the posting of an
ordinance or resolution in the bulletin board at the entrance of the
provincial capitol, or city or municipal hall, as the case may be, and
in at least two (2) conspicuous places in the LGU not later than five
(5) days after approval of the ordinance or resolution.

The ordinance or resolution shall be disseminated and posted in
Filipino or English and in the language or dialect understood by the
majority of the people in the LGU. The Secretary to the
Sanggunian shall record such fact in a book kept for the purpose,
stating the dates of approval and posting.

In the case of highly urbanized and independent component cities,
the main features of the ordinance or resolution duly enacted or
adopted shall, in addition to being posted, be published once in a
local newspaper of general circulation within the city, provided,
that in the absence thereof, the ordinance or resolution shall be
published in any newspaper of general circulation.













131
8.0 LOCAL BUDGET AUTHORIZATION FORMS


LBA Form No. 1A

CHECKLIST ON DOCUMENTARY AND SIGNATURE
REQUIREMENTS FOR THE ANNUAL BUDGET


Document Signatory

Budget Message


Local Chief Executive


Local Expenditure Program


Local Chief Executive


BESF

Local Finance Committee
Local Chief Executive


AIP
(Approved by the Sanggunian
through a Resolution)


Secretary to the Sanggunian
Presiding Officer


Personnel Schedule

HRMO
Local Chief Executive







132



LBA Form No. 1B

CHECKLIST ON DOCUMENTARY AND SIGNATURE
REQUIREMENTS FOR THE SUPPLEMENTAL BUDGET


Document Signatory
Funds Actually Available:
Certified Statement of Additional Realized
Income
Certification of Savings

Local Treasurer and
Local Accountant
Local Treasurer and
Local Accountant

New Revenue Measure/s:
Certified Statement of Income from New
Revenue Measure/s

Copy of duly enacted ordinance which
imposes new local taxes, charges, fees,
fines or penalties or which raises existing
local taxes, charges, fees, fines or penalties

Copy of official communication stating that
the LGU is a recipient of new or higher
remittances, contributions, subsidies or
grants in aid from the National Government
or from government corporations and
private entities

Local Treasurer and
Local Accountant



Realignment of Appropriations in Times of Public
Calamity:
Certificate of Source of Funds Available for
Appropriations



Local Treasurer
Local Accountant and
LCE


133


9.0 Illustrative Example

Ordinance Authorizing the Annual Appropriations

APPROPRIATION ORDINANCE NO. _______
Series of ________


AN ORDINANCE AUTHORIZING THE ANNUAL BUDGET OF (Name of LGU)
FOR FISCAL YEAR _____ IN THE TOTAL AMOUNT
OF ______________________________ (P_____________) COVERING THE
VARIOUS EXPENDITURES FOR THE OPERATION OF THE ____________
GOVERNMENT FOR FISCAL YEAR ______, AND APPROPRIATING THE
NECESSARY FUNDS FOR THE PURPOSE


Introduced by:



Be it ordained in Regular Session assembled:

Section 1. The Annual Budget of the (Name of LGU) for Fiscal Year _____ in the total
amount of ______________________________ (P____________) covering the various
expenditures for the operation of the Provincial/City/Municipal Government for the year
____ is hereby approved.

The budget documents consisting of the following are incorporated herein and made integral
part of this Ordinance:
1. Budget of Expenditures and Sources of Financing
2. Annual Investment Program
3. Personnel Schedule by department/office/unit
4. Others

Section 2. Sources of Funds. (Refer to the illustrative example of the LEP on pages 92-98)

Section 3. Use of Funds. (Refer to the illustrative example of the LEP on pages 92-98_)

Section 4. Use of Savings and Augmentation. In accordance with Section 336 of Republic
Act No. 7160, the Local Government Code of 1991, the Governor/Mayor and the Presiding
Officer of the Sanggunian are authorized to augment any item in the approved annual budget
for their respective offices from savings in other items within the same expense class of their
respective appropriations.

For this purpose, savings refer to portions or balances of any programmed appropriation
free from any obligation or encumbrance, still available after the satisfactory completion or



134

the unavoidable discontinuance or abandonment of the work, activity or purpose for which
the appropriation is authorized, or arising from unpaid compensation and related costs
pertaining to vacant positions and leaves of absence without pay.

Augmentation implies the existence in the budget of an item, project, activity or purpose
with an appropriation which, upon implementation or subsequent evaluation of needed
resources, is determined to be deficient.

Section 5. Priority in the Use of Personal Services Savings. Priority shall be given to the
personnel benefits of local employees in the use of Personal Services savings. (Sample policy
only)

Section 6. Separability Clause. If, for any reason, any Section or provision of this
Appropriation Ordinance is disallowed in Budget Review or declared invalid by proper
authorities, other Sections or provisions hereof that are not affected thereby shall continue to
be in full force and effect.

Section 7. Effectivity. The provisions of this Appropriation Ordinance shall take effect on
January one, Two thousand and _____________.


ENACTED: This ____ day of __________ at ____________________.

x--------------------------------------------x

I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.


NAME AND SIGNATURE
OF THE SECRETARY TO THE SANGGUNIAN




NAME AND SIGNATURE
OF THE PRESIDING OFFICER



APPROVED:


NAME AND SIGNATURE OF THE LOCAL CHIEF EXECUTIVE
DATE OF APPROVAL:


135

10.0 Sample Formats

10.1 Sample Format No. 1 Ordinance Authorizing Supplemental
Appropriations



APPROPRIATION ORDINANCE NO. __________
Series of _______


AN ORDINANCE AUTHORIZING SUPPLEMENTAL BUDGET NO. __, SERIES
_______ INVOLVING AN AMOUNT OF____________________ (P__________) FOR
____________(purpose)_____________________________________


Be it ordained in Regular Session assembled:

Section 1. The Supplemental Budget of the (Name of LGU) Government for Fiscal Year
_____ in the total amount of ______________________________ (P____________) for
________________________________ is hereby approved.

The budget documents consisting of the following are incorporated herein and made integral
part of this Ordinance:

1.
2.
3.
4.


Section 2. Sources of Funds. The sources of funds for the Supplemental Budget in the total
amount of _____________________________________ (P___________) shall be as
follows:

Beginning Balance P___________
Add: Income Sources
(Funds Actually Available Certified by Local Treasurer
or New Revenue Source
or Item/s to be Realigned in Times of Public Calamity) ____________

Total P___________


Section 3. Use of Funds. The amount of _____________________________(P_______) is
hereby appropriated for the Supplemental Budget of the ( Name of LGU), as follows:



136




Proposed New Appropriations Language

For __________________________________________ .P___________


New Appropriations by Program/Project/Activity (000)



Program/Project/Activity
Current Operating
Expenditures
Capital
Outlay
Financial
Expenses
Total
Personal
Services
Maintenance
and Other
Operating
Expenses

A. Programs

I. General Administration
Services
a. General
Administrative and
Support Services
b.


Sub-total

II. Operations
a.
b.
c.


Sub-total
Total, Programs

B. Projects

I. Locally-funded Project
a.
b.


Sub-total
Total, Projects
Total New Appropriations






137



Program Appropriation and Obligation by Object (000)


Object of Expenditure
Account
Code*
Past Year
Current
Year
Budget Year

Personal Services (PS)






Total PS

Maintenance and Other
Operating Expenses (MOOE)





Total MOOE

Capital Outlay (CO)






Total CO

Financial Expenses






Total Financial Expenses

TOTAL APPROPRIATIONS



Section 4. Separability Clause. If, for any reason, any section or provision of this
Ordinance is declared invalid or unconstitutional, other sections or provisions thereof which
are not affected thereby shall continue to be in full force and effect.



138





Section 5. Effectivity. The provisions of this Ordinance shall take effect on
_________________.

ENACTED: This ____ day of __________ at ____________________

x--------------------------------------------x


I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.



NAME AND SIGNATURE
OF THE SECRETARY TO THE SANGGUNIAN



NAME AND SIGNATURE
OF THE PRESIDING OFFICER



APPROVED:



NAME AND SIGNATURE OF THE LOCAL CHIEF EXECUTIVE
DATE OF APPROVAL:
















139





10.2 Sample Format No. 2 Approval Letter of the LCE




Date


THE HONORABLE PRESIDING OFFICER
THE HONORABLE MEMBERS OF THE SANGGUNIAN

Ladies/Gentlemen:

Today, I sign Appropriation Ordinance No. __________ for Fiscal Year ____ entitled,
AN ORDINANCE AUTHORIZING THE ANNUAL BUDGET OF (Name of LGU)
FOR FISCAL YEAR _____ IN THE TOTAL AMOUNT OF
______________________________ (P_____________) COVERING THE VARIOUS
EXPENDITURES FOR THE OPERATION OF THE ____________ GOVERNMENT
FOR FISCAL YEAR ______, AND APPROPRIATING THE NECESSARY FUNDS
FOR THE PURPOSE (or AN ORDINANCE AUTHORIZING SUPPLEMENTAL
BUDGET NO. __, SERIES _______ INVOLVING AN AMOUNT
OF____________________ (P__________) FOR
____________(purpose)_____________________________________).


With the passage of the FY ____ Annual/Supplemental Budget of the (Name of LGU)
under Appropriation Ordinance No. _____, we will be giving better basic services to our
constituents.

Very truly yours,



NAME AND SIGNATURE
OF THE
LOCAL CHIEF EXECUTIVE












140





10.3 Veto Message Format

10.3.1 Sample Format No. 3 Partial Veto




Date

THE HONORABLE PRESIDING OFFICER
THE HONORABLE MEMBERS OF THE SANGGUNIAN

Ladies/Gentlemen:

Today, I sign Appropriation Ordinance No. __________ for Fiscal Year ____ entitled,
AN ORDINANCE AUTHORIZING THE ANNUAL BUDGET OF (Name of LGU)
FOR FISCAL YEAR _____ IN THE TOTAL AMOUNT OF
______________________________ (P_____________) COVERING THE VARIOUS
EXPENDITURES FOR THE OPERATION OF THE ____________ GOVERNMENT
FOR FISCAL YEAR ______, AND APPROPRIATING THE NECESSARY FUNDS
FOR THE PURPOSE (or AN ORDINANCE AUTHORIZING SUPPLEMENTAL
BUDGET NO. __, SERIES _______ INVOLVING AN AMOUNT
OF____________________ (P__________) FOR
____________(purpose)_____________________________________).

On the other hand, pursuant to the powers vested in me by the Local Government
Code of 1991, I am duty bound to veto some items of appropriation in the above-cited
Appropriation Ordinance No. ______ on the grounds that they result from ultra vires acts of
the Sanggunian and are prejudicial to public welfare, as follows:

1.

2.

In view of the foregoing, with the passage of the FY ______ Annual/Supplemental
Budget of the (Name of LGU) under Appropriation Ordinance No. _____, we will be giving
better basic services to our constituents.

Accordingly, I am returning the approved Appropriation Ordinance No. _____
together with my partial veto, to the Sanggunian, for their appropriate action.

Very truly yours,

NAME AND SIGNATURE
OF THE LOCAL CHIEF EXECUTIVE




141






10.3.2 Sample Format No. 4 Total Veto



Date


THE HONORABLE PRESIDING OFFICER
THE HONORABLE MEMBERS OF THE SANGGUNIAN

Ladies/Gentlemen:

Today, I veto Appropriation Ordinance No. __________ for Fiscal Year ____
entitled, AN ORDINANCE AUTHORIZING THE ANNUAL BUDGET OF (Name of
LGU) FOR FISCAL YEAR _____ IN THE TOTAL AMOUNT OF
______________________________ (P_____________) COVERING THE VARIOUS
EXPENDITURES FOR THE OPERATION OF THE ____________ GOVERNMENT
FOR FISCAL YEAR ______, AND APPROPRIATING THE NECESSARY FUNDS
FOR THE PURPOSE (or AN ORDINANCE AUTHORIZING SUPPLEMENTAL
BUDGET NO. __, SERIES _______ INVOLVING AN AMOUNT
OF____________________ (P__________) FOR
____________(purpose)_____________________________________).

Pursuant to the powers vested in me by the Local Government Code of 1991, I veto the
above-entitled Appropriation Ordinance No. ______ for the following reasons:

1.

2.

These acts of the Sanggunian are ultra vires and prejudicial to public welfare.

Hence, I am respectfully returning Appropriation Ordinance No. _____, together with this
Veto Message to the Sanggunian, for its appropriate action.

Very truly yours,



NAME AND SIGNATURE
OF THE
LOCAL CHIEF EXECUTIVE






142





10.4 Sample Format No. 5 Ordinance Authorizing Use of Savings
and Augmentation


ORDINANCE NO. __________
Series of _______

AN ORDINANCE AUTHORIZING THE GOVERNOR/MAYOR
AND/OR THE PRESIDING OFFICER OF THE SANGGUNIAN
TO USE SAVINGS FOR AUGMENTATION
IN ACCORDANCE WITH THE LOCAL GOVERNMENT CODE OF 1991

Be it ordained in Regular Session assembled:

Section 1. Use of Savings and Augmentation. In accordance with Section 336 of Republic
Act No. 7160, the Local Government Code of 1991, the Governor/Mayor and/or the
Presiding Officer of the Sanggunian is/are authorized to augment any item in the approved
annual budget for their respective offices from savings in other items within the same
expense class of their respective appropriations.

For this purpose, savings refer to portions or balances of any programmed appropriation
free from any obligation or encumbrance, still available after the satisfactory completion or
the unavoidable discontinuance or abandonment of the work, activity or purpose for which
the appropriation is authorized, or arising from unpaid compensation and related costs
pertaining to vacant positions and leaves of absence without pay.

Augmentation implies the existence in the budget of an item, project, activity or purpose
with an appropriation which, upon implementation or subsequent evaluation of needed
resources, is determined to be deficient;

Section 2. Priority in the Use of Personal Services Savings. Priority shall be given to the
personnel benefits of local employees in the use of Personal Services savings.

Section 3. Separability Clause. If, for any reason, any section or provision of this
Ordinance is declared invalid or unconstitutional, other sections or provisions thereof which
are not affected thereby shall continue to be in full force and effect.

Section 4. Effectivity. The provisions of this Ordinance shall take effect on
_______________.




ENACTED: This ____ day of __________ at ____________________.


x--------------------------------------------x


143







I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.



NAME AND SIGNATURE
OF THE SECRETARY TO THE SANGGUNIAN



NAME AND SIGNATURE
OF THE PRESIDING OFFICER



APPROVED:




NAME AND SIGNATURE OF THE LOCAL CHIEF EXECUTIVE
DATE OF APPROVAL:


















(Note: This form may be adopted in case the Sanggunian decides to grant the authority for
use of savings and augmentation under Section 336 of R.A. No. 7160 and the same authority
was not incorporated in the Ordinance authorizing the Annual Appropriations of the LGU)


144


Chapter 3. Budget Review Phase


1.0 Introduction

2.0 Legal Basis of Budget Review

3.0 Key Players in Budget Review

4.0 Reglementary Period of Review

5.0 The Budget Review Flow Chart

6.0 Steps in the Budget Review Phase
Step 1. Check the Appropriation Ordinance
with the Appended Budget Documents
Step 2. Review the Appropriation Ordinance
Step 3. Issue the Review Action
Review Actions
Effects of the Review Action
Format of the Review Action
Nature of the Review Action
Stamp of Review
Return of the Reviewed Appropriation Ordinance
to the LGU Concerned
Failure to Review the Appropriation Ordinance
within the Mandated Period
Review Actions and Corrective Measures
Enforcement of Ordinances or Resolutions
after Disapproval by Reviewing Authority

7.0 Local Budget Review Forms
LBR Form No. 1A - Checklist on Documentary and Signature
Requirements for the Annual Budget
LBR Form No. 1B - Checklist on Documentary and Signature
Requirements for the Supplemental Budget
LBR Form No. 2 - Table Recapitulating the Findings and
Possible Review Action



145

8.0 Illustrative Example Table Recapitulating the Findings
and Possible Review Actions

9.0 Sample Formats
9.1 Review Letter Declaring the Appropriation Ordinance
Operative in its Entirety
9.2 Review Letter Declaring the Appropriation Ordinance
Operative in its Entirety Subject to Some Conditions
9.3 Review Letter Declaring the Appropriation Ordinance
Inoperative in its Entirety
9.4 Review Letter Declaring the Appropriation Ordinance
Inoperative in Part
9.5 Resolution Declaring the Appropriation Ordinance
Operative in its Entirety
9.6 Resolution Declaring the Appropriation Ordinance
Operative in its Entirety Subject to Some Conditions
9.7 Resolution Declaring the Appropriation Ordinance
Inoperative in its Entirety
9.8 Resolution Declaring the Appropriation Ordinance
Inoperative in Part
9.9 Stamp of Review


















146
The Department of Budget and Management shall review ordinances
authorizing the annual or supplemental appropriations of provinces,
highly-urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in accordance
with Section 326 of R.A. No. 7160.

The Sangguniang Panlalawigan shall review the ordinance authorizing
annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period
prescribed for the review of other ordinances (Section 327, R.A. No.
7160).

Budget Review Phase

1.0 Introduction

Budget Review is the third phase in the local budget process. Its primary
purpose is to determine whether the ordinance has complied with the
budgetary requirements and general limitations set forth in the Local
Government Code of 1991 as well as provisions of other applicable laws.
It starts from the time the reviewing authority receives the Appropriation
Ordinance for review and ends with the issuance of the review action.


2.0 Legal Basis















3.0 Key Players in Budget Review

3.1 Secretary to the Sanggunian - Within three (3) days after
approval of the ordinance authorizing annual or supplemental
appropriations, the Secretary to the Sanggunian shall forward the
said ordinance to the Department of Budget and Management
Regional Office (DBM RO) or Sangguniang Panlalawigan for
review (Section 56 in relation with Sections 326 and 327, R.A. No.
7160).

3.2 Sangguniang Panlalawigan - The Sangguniang Panlalawigan
shall review the ordinance authorizing annual or supplemental
appropriations of component cities and municipalities within the
province (Section 327, R.A. No. 7160).
147


3.3 Provincial Finance Committee The Provincial Finance
Committee shall assist the Sangguniang Panlalawigan in the review
and evaluation of budgets of component cities and municipalities
and recommend the appropriate action thereon (Section 315 [f],
R.A. No. 7160).

3.4 Department of Budget and Management Regional Office The
DBM RO shall review the ordinance authorizing the annual or
supplemental appropriations of provinces, highly-urbanized cities
and independent component cities within its jurisdiction, and
municipalities within the Metropolitan Manila Area (Section 326,
R.A. No. 7160).


4.0 Reglementary Period of Review

The Appropriation Ordinance of provinces, highly-urbanized cities,
independent component cities, component cities and municipalities shall
be reviewed within 90 days from receipt of copies of such ordinances
(Section 327, R.A. No. 7160).


5.0 The Budget Review Flow Chart

The budget review flow chart below (Figure 12) shows the sequence of
activities from the time the Secretary to the Sanggunian submits the
approved Appropriation Ordinance to the reviewing body/office until the
same is returned together with the budget review action to the
Sanggunian concerned through the LCE.







148
































Figure 12. The Budget Review Flow Chart

1. Checks
compliance with
budgetary
requirements and
general limitations
2. Checks
compliance with
AIP
3. Checks for items
that are prohibited
by law
Issues the
Review Action
1. Prepares LBR
Form No.2
2. Prepares Review
Action
Advises the
Sanggunian on
the Budget
Review Action
Secretary
to the
Sanggunian

Reviewing Authority

Local Chief
Executive

Approves the
Appro-priation
Ordinance
Submits the
Appropriation
Ordinance
Checks the
Appropriation
Ordinance and
budgetary
requirements
Reviews the
Appropriation
Ordinance
Prepares LBR
Form Nos. 1A and
1B
Acts on the
Budget
Review
Action
Sanggunian

149
6.0 Steps in the Budget Review Phase

Step 1. Check the Appropriation Ordinance with the Appended
Budget Documents.
1.1 Using LBR Form Nos. 1A and No. 1B (Checklists on
Documentary and Signature Requirements for the Annual Budget
and Supplemental Budget), the DBM RO or Sangguniang
Panlalawigan shall check if the following budget documents with
the required signatures have been submitted together with the
Appropriation Ordinance:

1.1.1 For Annual Budget (Please refer to LBR Form No. 1A)

Document Signatory
Transmittal Letter Secretary to the Sanggunian
Appropriation Ordinance Secretary to the Sanggunian
Presiding Officer
LCE
BESF LFC
LCE
AIP
(Approved by the Sanggunian
through a Resolution)

Secretary to the Sanggunian
Presiding Officer
Personnel Schedule HRMO
LCE
Veto message, if any LCE
Sanggunians action on veto, if
any
Secretary to the Sanggunian
Presiding Officer



150
1.1.2 For Supplemental Budget (Please refer to LBR Form No.
1B)

Document Signatory
Transmittal Letter Secretary to the
Sanggunian
Appropriation Ordinance Secretary to the
Sanggunian
Presiding Officer
LCE
Funds Actually Available:
Certified Statement of Additional Realized
Income
Certification of Savings

Local Treasurer

Local Treasurer
and Local
Accountant
New Revenue Measures:
Certified Statement of Income from New
Revenue Measures
Copy of duly enacted Tax Ordinance
which imposes new local taxes, charges,
fees, fines or penalties, or which raises
existing local taxes, charges, fees, fines
or penalties
Copy of official communication stating
that the LGU is a recipient of new or
higher remittances, contributions,
subsidies or grants in aid from the
National Government or from
government corporations and private
entities

Local Treasurer
and Local
Accountant

Realignment of Appropriations in Times of
Public Calamity
Certificate of Source of Funds Available for
Appropriations

Local Treasurer
Local Accountant
LCE
Veto message, if any LCE
Sanggunians action on veto, if any Secretary to the
Sanggunian
Presiding Officer

All Appropriation Ordinances must carry the seal of the LGU.
151
Incomplete Submission

If the Appropriation Ordinance submitted for review lacks any of
the documents or the required signatures mentioned under item 1.1
above, the said Appropriation Ordinance shall not be reviewed and
shall be officially returned, in writing, by the DBM RO or
Sangguniang Panlalawigan to the LGU concerned through its
Secretary to the Sanggunian, requiring the resubmission of the
same with the necessary budget documents and/or signatures.


Step 2. Review the Appropriation Ordinance

Using the BESF, the reviewing officer shall validate the provisions of the
Appropriation Ordinance for compliance with the budgetary requirements
and general limitations. In addition, the following checks/validation
should also be undertaken:

2.1 Check that no official or employee is allowed a salary rate higher
than the maximum fixed for his position or other positions of
equivalent rank (Section 325 [b], R.A. No. 7160).

Using the Personnel Schedule and Index of Occupational Services
(IOS), check the authorized salary grade and the corresponding
salary for each position and compare with the authorized rate in the
Salary Schedule being implemented by the LGU.

2.2 Check that no local fund is appropriated to increase or adjust
salaries or wages of officials and employees of the National
Government, except as may be expressly authorized by law
(Section 325 [c], R.A. No. 7160).

2.3 In cases of abolition of positions and the creation of new ones
resulting from the abolition of existing positions in the career
service, check that such abolition or creation is made in accordance
with pertinent provisions of R.A. No. 7160 and civil service laws,
rules and regulations (Section 325 [d], R.A. No. 7160).

2.4 Check that all positions in the official plantilla for career positions,
which are occupied by incumbents holding permanent
appointments, are covered by adequate appropriations (Section 325
[e], R.A. No. 7160).

152
2.5 Check that there are no changes in designation or nomenclature of
positions resulting in a promotion or demotion in rank or increase
or decrease in compensation, except when the position is actually
vacant (Section 325 [f], R.A. No. 7160).

2.6 Check that the effectivity of the creation of new positions and
salary increases and adjustments is not made retroactive (Section
325 [g], R.A. No. 7160).

2.7 Check if the projects in the Appropriation Ordinance are found in
the approved AIP (Section 305 [i], R.A. No. 7160).

2.8 Check if there are items in the Appropriation Ordinance that are
specifically prohibited by law.


Step 3. Issue the Review Action

The DBM RO or Sangguniang Panlalawigan may prepare the Table
Recapitulating the Findings and Possible Review Action (LBR Form No.
2 on page 160).

This Table summarizes the various findings of the reviewing authority
and indicates the possible action that may be taken (See illustrative
example on page 161).

3.1 Review Actions

After the evaluation of the Appropriation Ordinance and its supporting
documents, the reviewing authority may take any of the following
actions:

3.1.1 Declare the Appropriation Ordinance operative in its
entirety.

The Appropriation Ordinance shall be declared operative in
its entirety when it fully complies with the budgetary
requirements and general limitations set forth under R.A.
No. 7160 (Section 327, R.A. No. 7160).

3.1.2 Declare the Appropriation Ordinance operative in its
entirety, subject to conditions.

153
The Appropriation Ordinance shall be declared operative in
its entirety but subject to conditions in the following cases:

Certain items of appropriation require prior clearance or
documentation

Certain items of appropriation require prior approval by
appropriate authorities

Certain items of appropriation are found to be deficient
from what is prescribed by law and need to be increased
(e.g., insufficient provisions for PhilHealth, GSIS
premiums for some employees, etc.), except in cases
where the Appropriation Ordinance has to be declared
inoperative in its entirety.

Other conditions that may restrain the declaration of the
Appropriation Ordinance as operative

3.1.3 Declare the Appropriation Ordinance inoperative in its
entirety.

The Appropriation Ordinance shall be declared inoperative
in its entirety under any of the following cases:

When appropriation exceeds estimates of income (Section
324 [a], R.A. No. 7160)

Non-provision or insufficient provision for any of the
budgetary requirements under Section 324 of R.A. No.
7160

Non-provision or insufficient provision of the 20% of the
IRA for development projects (Section 287, R.A. No.
7160)

When all the projects included in the Appropriation
Ordinance are different from those listed in the AIP

When no sufficient appropriation is provided for payment
of loans and other indebtedness incurred or when no
provision is made to redeem or retire bonds, debentures,
154
securities, notes and other obligations issued (Section
303, R.A. No. 7160)

3.1.4 Declare the Appropriation Ordinance inoperative in part.

The Appropriation Ordinance may be declared inoperative in
part under the following conditions:

When some items are contrary to limitation or in excess
of the amount prescribed by R.A. No. 7160, such as, but
not limited to, Discretionary Purposes, Personal Services,
Funds for Confidential/Intelligence Expenses,
Appropriation for Debt Servicing

When some items have no legal basis (e.g., rice subsidy,
COLA, 14
th
month pay, etc.)

3.2 Effects of the Review Action

3.2.1 When the Appropriation Ordinance is declared operative in
its entirety, it shall continue to be in full force and effect.

3.2.2 When the Appropriation Ordinance is declared operative in
its entirety, subject to conditions, those items not subject to
conditions shall continue to be in full force and effect. The
items of appropriation subject to conditions shall take effect
only upon compliance with the conditions imposed.

3.2.3 When the Appropriation Ordinance is declared inoperative in
its entirety:

The Appropriation Ordinance loses force and effect.

If it is the ordinance authorizing the annual
appropriations that has been declared inoperative in its
entirety during the fiscal year covered thereby, the LGU
concerned shall operate under a reenacted budget
effective immediately until such time that the new
ordinance authorizing the annual appropriations is
enacted and approved.

The local treasurer shall not make further disbursements
of funds from any of the items of appropriation declared
155
inoperative, disallowed, or reduced (Section 327, R.A. No.
7160).

The budget shall be revised to comply with the provisions
of law and authorized through another Appropriation
Ordinance which shall then be submitted to the reviewing
authority.

3.2.4 When the Appropriation Ordinance is declared inoperative in
part:

The local treasurer shall not make further disbursements
of funds from any of the items of appropriation declared
inoperative, disallowed, or reduced (Section 327, R.A. No.
7160).

Only the items of appropriation that have not been
declared inoperative, or have not been disallowed, shall
continue to be in full force and effect.

3.3 Format of the Review Action

The review action by the DBM RO shall be in the form of a letter,
while that of the Sangguniang Panlalawigan shall be in the form of
a Resolution. All the findings must be disclosed in the review
action. (Sample Formats of Review Letters and Resolutions can be
found on pages 162-169).

3.4 Nature of the Review Action

3.4.1 The review action does not amend the act of the Sanggunian
as embodied in the Appropriation Ordinance.

The primary purpose of the review is to determine
whether the Appropriation Ordinance has complied with
the provisions of law.

The findings of the reviewing authority are merely
enumeration of infractions of budgetary requirements,
general limitations and other provisions of R.A. No. 7160
and other applicable laws, as well as recommendations of
what specific actions the Sanggunian will take to comply
with the provisions of law.
156

The condition requiring provision for deficiencies shall
be acted upon in the next supplemental budget.

3.4.2 The review action, likewise, does not authorize an item or
items of appropriation that is/are specifically prohibited by
law.

Based on jurisprudence, For an ordinance to be valid, it
shall not violate any law or statute. (Magtajas vs. Pryce
Properties Corp., Inc., 234 SCRA 255)

3.5 Stamp of Review

The stamp of review of the DBM RO or Sangguniang
Panlalawigan shall be affixed on every page of the reviewed
Appropriations Ordinance and duly signed by the Regional
Director or by the Secretary to the Sanggunian and/or the Presiding
Officer, as the case may be. (Sample Format of the Stamp of
Review on page 170).

3.6 Return of the Reviewed Appropriation Ordinance to the LGU
Concerned

The DBM RO or Sangguniang Panlalawigan shall, within the 90-
day reglementary period, advise the Sanggunian concerned,
through the LCE, of the action on the Appropriation Ordinance
reviewed (Section 327, R.A. No. 7160).

3.7 Failure to Review the Appropriation Ordinance within the
Mandated Period

If within 90 days from receipt of the copy of the Appropriation
Ordinance, the DBM RO or Sanggunian Panlalawigan takes no
action thereon, the same shall be deemed to have been reviewed in
accordance with law and shall continue to be in full force and
effect (Section 327, R.A. No. 7160).







157
3.8 Review Actions and Corrective Measures

REVIEW ACTIONS CORRECTIVE MEASURES
Appropriation Ordinance
is declared inoperative in
its entirety.
Sanggunian shall enact a new Ordinance
authorizing Annual Appropriations
based on a new executive budget
proposal
Appropriation Ordinance
is declared inoperative in
part.

For items without legal
basis.

For items in excess of
budgetary requirement
and general limitations.

For items that are in
excess of the amount
prescribed by law


For items found to be
deficient from that
prescribed by law




The LGU, through the Treasurer, shall
not make further disbursements of
funds from any of the items of
appropriation declared inoperative,
disallowed or reduced and the LCE
shall notify the reviewing authority of
such action.





Sanggunian shall enact a new
Ordinance authorizing Supplemental
Appropriations based on a proposed
supplemental budget to cover the
deficiency.
Appropriation Ordinance
is declared operative
subject to conditions.

The LGU shall comply with the
conditions imposed before any
disbursements are made and the LCE
shall notify the reviewing authority of
such action.


3.9 Enforcement of Ordinances or Resolutions after Disapproval
by Reviewing Authority

Any attempt to enforce any disapproved ordinance or resolution
adopting the local development plan and public investment
program, after disapproval by the LCE or by the reviewing
authority, shall be sufficient ground for the suspension or dismissal
of the official or employee concerned (Article 112, IRR of R.A. No.
7160).
158
7.0 LOCAL BUDGET REVIEW FORMS



LBR Form No. 1A

CHECKLIST ON DOCUMENTARY AND SIGNATURE
REQUIREMENTS FOR THE ANNUAL BUDGET

_____________ _____________
Date Received Deadline
_________________________________________ _____
Local Government Unit Class


_________________________________ _______________________
Title General Fund



Check each item

Signatory

Remarks



a. Transmittal Letter

Secretary to the Sanggunian


b. Budget Message


LCE


c. Appropriation Ordinance


Secretary to the Sanggunian
Presiding Officer
LCE

d. Budget of Expenditures
and Sources of Financing.



Local Finance Committee
LCE


e. Annual Investment Program


Secretary to the Sanggunian
Presiding Officer

f. Personnel Schedule


HRMO
LCE



g. Veto message, if any

LCE


h. Sanggunians action on veto, if any

Secretary to the Sanggunian
Presiding Officer



_______________________
Reviewing Officer





159

LBR Form No. 1B

CHECKLIST ON DOCUMENTARY AND SIGNATURE
REQUIREMENTS FOR THE SUPPLEMENTAL BUDGET
_____________ _____________
Date Received Deadline
_________________________________________ ______
Local Government Unit Class
_________________________________ _______________________
Title General Fund
Check each item Signatory Remarks


a. Transmittal Letter

Secretary to the Sanggunian


b. Budget Message


LCE



c. Appropriation Ordinance




Secretary to the Sanggunian
Presiding Officer
LCE



d. Funds Actually Available:
Certified Statement of Additional
Realized Income
Certification of Savings





Local Treasurer and Local
Accountant
Local Treasurer and Local
Accountant
e . New Revenue Measures:
Certified Statement of Income from
New Revenue Measures;
Copy of duly enacted Tax
Ordinance which imposes new local
taxes, charges, fees, fines or
penalties or which raises existing
local taxes, charges, fees, fines or
penalties; and
Copy of official communication
stating that the LGU is a recipient of
new or higher remittances,
contributions, subsidies or grants in
aid from the National Government or
from government corporations and
private entities


Local Treasurer and Local
Accountant




f. Realignment of Appropriations in Times of
Public Calamity
Certificate of Source of Funds
Available for Appropriations






Local Treasurer
Local Accountant
LCE



g. Veto message, if any

LCE


h. Sanggunians action on veto, if any

Secretary to the Sanggunian
Presiding Officer


_______________________
Reviewing Officer
160




LBR Form No. 2


TABLE RECAPITULATING THE FINDINGS
AND POSSIBLE REVIEW ACTIONS


FINDINGS POSSIBLE REVIEW ACTIONS
















An illustrative example of LBR Form No. 2 with entries on findings and possible
review actions is shown on page 161.









161

1.0 Illustrative Example


Table Recapitulating the Findings and Possible Review Actions


FINDINGS POSSIBLE REVIEW ACTIONS
Incomplete budget documents
appended to the Appropriation
Ordinance
Return in writing, the Appropriation
Ordinance with the budget documents
and require resubmission with complete
budget documents
Lack of required signatories in the
Appropriation Ordinance or budget
documents
Return in writing, the Appropriation
Ordinance with the budget documents
and require resubmission duly signed
Appropriation Ordinance fully
complies with the budgetary
requirements and general
limitations
Declare the Appropriation Ordinance
operative in its entirety
Some items of appropriation require
prior approval by appropriate
authorities, prior clearance or
documentation, and other
conditions.
Declare the Appropriation Ordinance
operative in its entirety with some
conditions
The aggregate amount appropriated
exceeds the estimates of income
Declare the Appropriation Ordinance
inoperative in its entirety
The Appropriation Ordinance did
not sufficiently provide for payment
of loans and other indebtedness
Declare the Appropriation Ordinance
inoperative in its entirety
Provision for debt servicing
exceeds 20% of the regular income
Declare the Appropriation Ordinance
inoperative in part, disallowing the
excess.










162



9.0 Sample Formats

9.1 Sample Format No. 1 - Review Letter Declaring the Appropriation
Ordinance Operative in its Entirety





____________________
Date

The Honorable Members of the Sanggunian
Province/City/Municipality of _____________

Thru: The Provincial Governor/City/Municipal Mayor

Ladies/Gentlemen:

Pursuant to the provisions of the Local Government Code of 1991 (Republic Act [R.A.] No.
7160), our review of the FY 2007 Annual/Supplemental Budget No. ___ of the
Province/City/Municipality of ____________, involving a total appropriation of
P___________ under Appropriation Ordinance No. _________, submitted to this Office for
review on_________, reveals substantial compliance with the same law and its Implementing
Rules and Regulations.

Accordingly, the said Appropriation Ordinance is declared operative in its entirety effective
on ________________, subject to the posting requirement under Section 59 of R.A. No.
7160.

It is understood that this review action does not authorize any item of appropriation that is
specifically prohibited by or inconsistent with the provisions of law.

Compliance with all existing laws, rules and regulations shall be the responsibility of the
implementing local government unit.

Very truly yours,

By Authority of the
Secretary of Budget and Management:


______________________
Director IV




163


9.2 Sample Format No. 2 - Review Letter Declaring the Appropriation
Ordinance Operative in its Entirety Subject to Some Conditions


____________________
Date

The Honorable Members of the Sanggunian
Province/City/Municipality of _____________

Thru: The Provincial Governor/City/Municipal Mayor

Ladies/Gentlemen:

Pursuant to the provisions of the Local Government Code of 1991 (Republic Act [R.A.] No.
7160), our review of the FY 2007 Annual/Supplemental Budget No. ___ of the
Province/City/Municipality of ____________, involving an appropriation of P___________
under Appropriation Ordinance No. _________, submitted to this Office for review
on_________, reveals substantial compliance with the same law and its Implementing Rules
and Regulations, except for the following:

1.
2.

Notwithstanding the above, the Appropriation Ordinance is declared operative in its entirety
effective on ___________, subject to the posting requirement under Section 59 of R.A. No.
7160, and further subject to the following conditions:

1.
2.

The Province/City/Municipal government shall comply with the herein conditions and notify
this Office of the actions taken thereon.

It is understood that this review action does not authorize any item of appropriation that is
specifically prohibited by or inconsistent with the provisions of law.

Compliance with all existing laws, rules and regulations shall be the responsibility of the
implementing local government unit.

Very truly yours,

By Authority of the
Secretary of Budget and Management:

_______________________
Director IV

164


9.3 Sample Format No. 3 - Review Letter Declaring the Appropriation
Ordinance Inoperative in its Entirety



____________________
Date

The Honorable Members of the Sanggunian
Province/City/Municipality of _____________

Thru: The Provincial Governor/City/Municipal Mayor

Ladies/Gentlemen:

Pursuant to the provisions of the Local Government Code of 1991 (Republic Act [R.A.] No.
7160), our review of the FY 2007 Annual/Supplemental Budget No. ___ of the
Province/City/Municipality of ____________, involving an appropriation of P___________
under Appropriation Ordinance No. _________, submitted to this Office for review
on_________, shows that it has not complied with the budgetary requirements and general
limitations as well as other provisions of law as enumerated hereunder:

1.
2.
3.
4.
5.

In view thereof, the said Appropriation Ordinance is declared inoperative in its entirety
effective immediately. Consequently, the previous years budget is deemed reenacted
pending the submission of a new ordinance authorizing the annual appropriations, taking into
account the above-mentioned findings. Nevertheless, it is understood that, in the
implementation of the reenacted budget, only the annual appropriation for salaries and wages
of existing positions, statutory and contractual obligations, and essential operating expenses
authorized in the annual and supplemental budgets for the preceding year shall be deemed
reenacted.

Very truly yours,

By Authority of the
Secretary of Budget and Management:

__________________________
Director IV




165


9.4 Sample Format No. 4 - Review Letter Declaring the Appropriation
Ordinance Inoperative in Part



____________________
Date


The Honorable Members of the Sanggunian
Province/City/Municipality of _____________

Thru: The Provincial Governor/City/Municipal Mayor

Ladies/Gentlemen:

Pursuant to the provisions of the Local Government Code of 1991 (Republic Act No. 7160),
our review of the FY 2007 Annual/Supplemental Budget No. ___ of the
Province/City/Municipality of ____________, involving an appropriation of P___________
under Appropriation Ordinance No. _________, submitted to this Office for review
on_________, shows substantial compliance with the same law and its Implementing Rules
and Regulations, except for the following:
1.
2.
3.
4.
5.

Notwithstanding the above, the budget is declared inoperative in part effective on
______________, subject to the posting requirements under Section 59 of R.A. No. 7160.
The Province/City/Municipal government shall comply with the herein review findings and
notify this Office of the actions taken thereon.

It is understood that this review action does not authorize any item of appropriation that is
specifically prohibited by or inconsistent with the provisions of law.

Compliance with all existing laws, rules and regulations shall be the responsibility of the
implementing local government unit.

Very truly yours,

By Authority of the
Secretary of Budget and Management:


_________________________
Director IV


166


9.5 Sample Format No. 5 Resolution Declaring the Appropriation
Ordinance Operative in its Entirety



RESOLUTION NO. ___

A RESOLUTION DECLARING THE APPROPRIATION ORDINANCE NO. __
OF THE CITY/MUNICIPALITY OF ____________________
OPERATIVE IN ITS ENTIRETY

WHEREAS, Appropriation Ordinance No. ___ of the City/Municipality of ___________
authorizing its Annual Budget for Fiscal Year _____, involving an
appropriation of P____________ , was submitted to this Sanggunian for review
on __________________ pursuant to the provisions of Republic Act (R.A.) No.
7160;

WHEREAS, the subject Appropriation Ordinance shows substantial compliance with the
same law and its Implementing Rules and Regulations;

NOW, THEREFORE, on motion of SP Member ___________ duly seconded by SP Member
_____________;

THE SANGGUNIANG PANLALAWIGAN IN SESSION DULY ASSEMBLED:

RESOLVED, to declare Appropriation Ordinance No. ____ of the City/Municipality of
____________ operative in its entirety, effective on ______________,
subject to the posting requirements under Section 59 of R.A. No. 7160.

RESOLVED FURTHER, to inform the City/Municipality that this review action does not
authorize any item of appropriation that is specifically prohibited by or
inconsistent with the provisions of law.

RESOLVED FINALLY, to send a copy of this Resolution to the Sangguniang
Panlungsod/Bayan of the City/Municipality of _____________ through the
City/Municipal Mayor.

ADOPTED. _____(Date)_______.
x- - - - - - -- - - - - - - - - -- - - - - - -- - - - - - - -x

I hereby certify that the foregoing is a true and accurate copy of the Resolution which
was duly adopted by the Sangguniang Panlalawigan of ___________ during its Regular
Session held on _________________.

_________________________
Secretary to the Sanggunian
________________
Presiding Officer

167


9.6 Sample Format No. 6 - Resolution Declaring the Appropriation
Ordinance Operative in its Entirety Subject to Some Conditions



RESOLUTION NO. ___

A RESOLUTION DECLARING THE APPROPRIATION ORDINANCE NO. ____
OF THE CITY/MUNICIPALITY OF ____________________________
OPERATIVE IN ITS ENTIRETY SUBJECT TO SOME CONDITIONS

WHEREAS, Appropriation Ordinance No. ___ of the City/Municipality of _______________
authorizing its Annual Budget for Fiscal Year _____, involving an appropriation of
P____________, was submitted to this Sanggunian for review on
__________________ pursuant to the provisions of Republic Act (R.A.) No. 7160;

WHEREAS, subject Appropriation Ordinance reveals substantial compliance with the same law
and its Implementing Rules and Regulations except for the following:
1.
2.

NOW THEREFORE, on motion of SP Member ______ duly seconded by SP Member
___________;

THE SANGGUNIANG PANLALAWIGAN IN SESSION DULY ASSEMBLED:

RESOLVED, to declare Appropriation Ordinance No. ____ of the City/Municipality of
____________ OPERATIVE IN ITS ENTIRETY, effective ______________,
subject to the posting requirements under Section 59 of R.A. No. 7160, and subject
further to the following conditions:
1.
2.

RESOLVED FURTHER, to require the City/Municipality to comply with the herein conditions and
notify this body of actions taken thereon.

RESOLVED FURTHER, to inform the City/Municipality that this review action does not authorize
any item of appropriation that is specifically prohibited by or inconsistent with the
provisions of law.

RESOLVED FINALLY, to send a copy of this Resolution to the Sangguniang Panlungsod/Bayan of
the City/Municipality of _____________ through the City/Municipal Mayor.

ADOPTED. _____(Date)_____.
x- - - - - - -- - - - - - - - - -- - - - - - -- - - - - - - -x

I hereby certify that the foregoing is a true and accurate copy of the Resolution which was
duly adopted by the Sangguniang Panlalawigan of ___________ during its Regular Session held on
________________.
__________________________
Secretary to the Sanggunian
_________________
Presiding Officer
168


9.7 Sample Format No. 7 Resolution Declaring the Appropriation
Ordinance Inoperative in its Entirety



RESOLUTION NO. ___

A RESOLUTION DECLARING THE APPROPRIATION ORDINANCE NO. ____
OF THE CITY/MUNICIPALITY OF ___________ INOPERATIVE IN ITS ENTIRETY

WHEREAS, Appropriation Ordinance No. ___ of the City/Municipality of _______________
authorizing its Annual/Supplemental Budget for Fiscal Year _____, involving an
appropriation of P____________, was submitted to this Sanggunian for review on
__________________ pursuant to the provisions of Republic Act (R.A.) No. 7160;

WHEREAS, the subject Appropriation Ordinance has not complied with the budgetary
requirements and general limitations as well as other provisions of law as enumerated
hereunder:
1.
2.

NOW THEREFORE, on motion of SP Member ______ duly seconded by SP Member
___________;

THE SANGGUNIANG PANLALAWIGAN IN SESSION DULY ASSEMBLED:

RESOLVED, to declare Appropriation Ordinance No. ____ of the City/Municipality of
____________ inoperative in its entirety effective immediately.

RESOLVED FURTHER, to inform the Sangguniang Panlungsod/Bayan of the City/Municipality of
___________, through the City/Municipal Mayor, that the previous years budget is
deemed reenacted pending the submission and enactment/approval of the new
ordinance authorizing the annual appropriations, taking into account the above-
mentioned findings; and that, in the implementation of the reenacted budget, only the
annual appropriation for salaries and wages of existing positions, statutory and
contractual obligations, and essential operating expenses authorized in the annual and
supplemental budgets for the preceding year shall be deemed reenacted.

RESOLVED FINALLY, to send a copy of this Resolution to the Sangguniang Panlungsod/Bayan of
the City/Municipality of _____________ , through the City/Municipal Mayor.

ADOPTED. _______(Date)________.
x- - - - - - -- - - - - - - - - -- - - - - - -- - - - - - - -x

I hereby certify that the foregoing is a true and accurate copy of the Resolution which was
duly adopted by the Sangguniang Panlalawigan of ___________ during its regular session held on
__________________.
_______________________
Secretary to the Sanggunian
_______________
Presiding Officer


169


9.8 Sample Format No. 8 - Resolution Declaring the Appropriation
Ordinance Inoperative in Part


RESOLUTION NO. ___

A RESOLUTION DECLARING THE APPROPRIATION ORDINANCE NO. ___
OF THE CITY/MUNICIPALITY OF ________________ INOPERATIVE IN PART

WHEREAS, Appropriation Ordinance No. ___ of the City/Municipality of _______________
authorizing its Annual Budget for Fiscal Year _____, involving an appropriation
of P____________, was submitted to this Sanggunian for review on
__________________ pursuant to the provisions of Republic Act (R.A.) No.
7160;

WHEREAS, the subject Appropriation Ordinance has substantially complied with the
budgetary requirements and general limitations as well as other provisions of law,
except for the following items of appropriation:
1.
2.

NOW THEREFORE, on motion of SP Member ____________ duly seconded by SP Member
___________;

THE SANGGUNIANG PANLALAWIGAN IN SESSION DULY ASSEMBLED:

RESOLVED, to declare Appropriation Ordinance No. ____ of the City/Municipality of
____________ inoperative in part, effective ______________, subject to the
posting requirements under Section 59 of R.A No. 7160:

RESOLVED FURTHER, to require the City/Municipality to comply with the herein review
findings and notify this body of actions taken thereon.

RESOLVED FURTHER, to inform the City/Municipality that this review action does not
authorize any item of appropriation that is specifically prohibited by or inconsistent
with the provisions of law.

RESOLVED FINALLY, to send a copy of this Resolution to the Sangguniang Panlungsod/Bayan
of the City/Municipality of _____________, through the City/Municipal Mayor.

ADOPTED. ________(Date)________.
x- - - - - - -- - - - - - - - - -- - - - - - -- - - - - - - -x

I hereby certify that the foregoing is a true and accurate copy of the Resolution which was
duly adopted by the Sangguniang Panlalawigan of ___________ during its regular session held
on _______________.
_________________________
Secretary to the Sanggunian
_______________
Presiding Officer

170

9.9 Sample Format No. 9 Stamp of Review

A.



















B.




















REVIEWED
PURSUANT TO THE PROVISIONS OF REPUBLIC ACT NO. 7160

BY AUTHORITY OF THE SECRETARY OF BUDGET AND MANAGEMENT



______________________________
DIRECTOR IV


REFERENCE: REVIEW LETTER DATED: _____________


REVIEWED
PURSUANT TO THE PROVISIONS OF REPUBLIC ACT NO. 7160

BY AUTHORITY OF THE SANGGUNIANG PANLALAWIGAN



______________________ ____________________
(Authorized Signatory/ies per the Internal Rules of Procedures)


REFERENCE: RESOLUTION NO.____ DATED: _____________
Seal of
the
Province
171


Chapter 4. Budget Execution Phase


1.0 Introduction

2.0 Legal Basis of Budget Execution

3.0 Key Players in Budget Execution

4.0 The Budget Execution Flow Chart

5.0 Budgetary Accounts in Budget Execution

6.0 Steps in the Budget Execution Phase
Step 1. Record the Approved Appropriations per Appropriation
Ordinance in the Appropriate Registry
Step 2. Release of Allotments
Step 3. Prepare the Cash Program and Summary of Financial
and Physical Performance Targets
3.1 Prepare the Cash Program
3.2 Prepare the Summary of Financial and Physical
Performance Targets
3.3 Prepare the Detailed Financial and Physical
Performance Targets
3.4 Revise and Adjust the Project Procurement
Management Plan (PPMP) and Corresponding
Annual Procurement Plan (APP)
Step 4. Obligate and Disburse Funds
Step 5. Adjust Cash Programs for Shortages and Overages
Step 6. Provide Corrective Actions for Negative Deviations

7.0 Local Budget Execution Forms
LBE Form No. 1 Local Budget Matrix
LBE Form No. 2 Allotment Release Order
LBE Form No. 3 Summary of Financial and Physical
Performance Targets
LBE Form No.3A Detailed Financial and Physical
Performance Targets


172
The financial affairs, transactions, and operations of local government
units shall be governed by the following fundamental principles:

(a) No money shall be paid out of the local treasury except in
pursuance of an appropriations ordinance or law;
(b) Local government funds and monies shall be spent solely for
public purposes;
(c) Local revenue is generated only from sources expressly authorized
by law or ordinance, and collection thereof shall at all times be
acknowledged properly;
(d) All monies officially received by a local government officer in any
capacity or on any occasion shall be accounted for as local funds,
unless otherwise provided by law;
(e) Trust funds in the local treasury shall not be paid out except in
fulfillment of the purpose for which the trust was created or the
funds received;
(f) Every officer of the local government unit whose duties permit or
require the possession or custody of local funds shall be properly
bonded, and such officer shall be accountable and responsible for
said funds and for the safekeeping thereof in conformity with the
provisions of law;
(g) Local governments shall formulate sound financial plans, and the
local budgets shall be based on functions, activities, and projects
in terms of expected results. (Section 305, R.A. No. 7160)
Budget Execution Phase

1.0 Introduction

Budget execution is the fourth phase in the local budget process. It
involves the release of allotments and the certification of available
appropriations and cash; the recording of actual obligations and
disbursement of funds for authorized PPAs to produce goods and services
that will benefit the general public. A critical aspect of this phase is the
collection of funds, such that disbursements do not exceed appropriations.
While seemingly a separate activity, the collection and/or receipt of
revenues are considered an integral part of budget execution.


2.0 Legal Basis
































173
The ordinance enacting the annual budget shall take effect at the
beginning of the ensuing calendar year. An ordinance enacting a
supplemental budget, however, shall take effect upon its approval or
on the date fixed therein. The responsibility for the execution of the
annual and supplemental budget shall be vested primary in the Local
Chief Executive concerned (Section 320, R.A. No. 7160).










3.0 Key Players in Budget Execution

3.1 Local Chief Executive The LCE shall be responsible for the
execution of the Annual Budget or General Appropriations
Ordinance and all subsequent supplemental budgets (Section 320,
R.A. No. 7160).

3.2 Vice Governor/Vice Mayor The Vice Governor/Vice Mayor
shall sign all warrants drawn on the provincial/city/municipal
treasury for all expenditures appropriated for the operations of the
Sangguniang Panlalawigan/Panlungsod/Bayan (Sections 466, 456
and 445, R.A. 7160).

3.3 Local Budget Officer The LBO shall be responsible for the
preparation of release documents (Local Budget Matrix, Allotment
Release Order) and the certification on the availability of
appropriations for obligation requests; as well as the preparation
and submission of quarterly and annual reports or statement of
allotments, obligations and balances. The LBO also coordinates
with the planning and development coordinator, treasurer, and
accountant in the execution of the budget (Section 475, R.A. No.
7160).

3.4 Local Treasurer The Local Treasurer shall be responsible for
the custody and proper management of the funds of the LGU
concerned. He takes charge of the collection of revenues and
disbursement of local government funds and such other funds the
custody of which may be entrusted to him by law or other
competent authority and the maintenance and updating of the tax
information system of the LGU. The Local Treasurer also certifies
as to the availability of funds prior to any disbursements (Section
470, R.A. No. 7160).

174
3.5 Local Accountant The Local Accountant shall be responsible for
the maintenance of the validity, reliability and propriety of all
financial transactions of the LGU concerned; the installation and
maintenance of the preparation and submission of financial
statements to the local chief executive and to the Sanggunian
concerned and maintenance of registries to control the
appropriations, allotments and obligations for all authorized
expenditures.* The Local Accountant also reviews supporting
documents before preparation of vouchers to determine
completeness of requirements; and controls the Books of Accounts
pursuant to the New Government Accounting System (Section 474,
R.A. No. 7160).

3.6 Local Planning and Development Coordinator The LPDC
shall be responsible for the formulation of integrated economic,
social, physical, and other development plans and policies for
consideration of the local development council; the monitoring and
evaluation of the implementation of the different development
programs, projects and activities in the LGU concerned, in
accordance with the approved development plan; the analysis of
income and expenditure patterns; and the formulation of fiscal
plans and policies for consideration of the local finance committee
(Section 476, R.A. No. 7160 ).

3.6 Department Head The Department Head shall be responsible
for the preparation of financial and physical performance targets
and obligation requests for authorized programs, projects and
activities for the department/office concerned; implementation of
programs, projects and activities to produce desired results/goods
and services; monitoring and evaluation of actual performance of
PPAs to provide corrective actions for negative deviations.











* Subject to the final guidelines to be issued by the Commission on Audit (COA)
175
4.0 The Budget Execution Flow Chart
























Figure 13. The Budget Execution Flow Chart


5.0 Budgetary Accounts in Budget Execution

The budgetary accounts maintained during the budget execution process
are composed of appropriations, allotments and obligations.

Appropriation: an authorization made by ordinance, directing the
payment of goods and services from local government
funds under specified conditions or purposes

Allotment: the authorization issued by the Local Chief Executive
(LCE) to a Department/Office of the LGU which
allows it to incur obligations for specified amounts
within its appropriations

Obligation: the specific amount within the allotment which is
committed to be paid by the LGU for any lawful
expenditure made by an accountable officer for and in
behalf of the LGU concerned.
Record the approved budget in the Registries


Release the Allotment (LBM /ARO)
Prepare the Cash Program and Financial/Physical
Performance Targets
Obligate and Disburse Funds for the Implementation of
Programs/Project/Activities

Adjust Cash Programs, Financial and Physical
Performance Targets for Shortages and Overages
Provide Corrective Actions for Negative Deviations












176

6.0 Steps in the Budget Execution Phase

Step 1. Record the approved appropriations per Appropriation
Ordinance in the appropriate registry

1.1 On the first business day of the fiscal year, the Local Accountant
shall record the entire annual budget of the LGU in the Registry of
Appropriations, Allotments and Obligations (RAAO). Separate
registries shall be maintained for the four classes of expenditures
per responsibility center (Section 474, R.A. No. 7160):

Registry of Appropriations, Allotments and Obligations Capital
Outlays (RAAOCO)
Registry of Appropriations, Allotments and Obligations
Maintenance & Other Operating Expenses (RAAOMOOE)
Registry of Appropriations, Allotments and Obligations
Personal Services (RAAOPS)
Registry of Appropriations, Allotment and Obligations
Financial Expenses (RAAOFE)

Guidelines to be Observed in Step 1

Budgetary reserves, which are stand-by appropriations ready for
release in case of calamities, as well as supplemental budgets, are
similarly recorded in the RAAO.

If the Sanggunian fails to enact the Ordinance at the beginning of
the fiscal year, only the annual appropriations for salaries and
wages of existing positions, statutory and contractual obligations,
and essential operating expenses authorized in the annual and
supplemental budgets for the preceding year shall be deemed
reenacted (Section 323, R.A. No. 7160).

Said re-enacted budget shall likewise be recorded in the registries.
Once the current budget is approved, the necessary adjustments
shall be made.

The system of recording in the registries shall follow the New
Government Accounting System (NGAS) prescribed by the
Commission on Audit.


177

Step 2. Release of Allotments

2.1 The Local Budget Matrix (LBM) (LBE Form No. 1) is issued to
effect the comprehensive release for a particular department/office.
Release of reserve amounts or amounts for later release, including
appropriated amounts under the needing clearance of the LBM
shall be effected through the use of Allotment Release Order
(ARO) or Local Budget Execution Form No. 2.

2.2 Use the following control tools in the execution of the budget:

Cash Programs and Cash Flow Analysis; and
Financial and Physical Performance Targets.

The Cash Program includes the scheduling of cash inflows and
outflows on a monthly basis.

The Cash Flow Analysis (CFA) is a critical tool in the control of
cash outflows matched with cash inflows to ensure that sufficient
cash is available to settle obligations as they fall due.

The Financial and Physical Performance Targets (FPPT) contain
the total cost of doing a particular PPA, performance indicators,
prior years accomplishments and physical targets for the year.

2.3 Prepare the LBM and the corresponding Cash Program for each
department/office. The LBM contains the released allotment or
fund that will finance the implementation of the PPAs and the Cash
Program ensures that there is available cash to be disbursed in the
payment of actual obligations.

2.4 Issue the LBM to each department/office that will give the
department head the comprehensive authority to incur obligations
that will not exceed the released amount. Include in the LBM
reserve imposition, earmarking of funds for clearance and
withholding of funds for later release to provide safeguards for
shortfall in the collection of anticipated revenues. These are all
policy-based actions to be reflected in the Appropriation Ordinance
for the budget year prior to the issuance or release of the LBM.



178
2.5 Include the following budgetary items in the LBM:

By source of appropriation, whether the appropriation is
authorized under the Annual Budget or under the Supplemental
Budget

By fund, whether the expenditure item is classified into any of
the funds established for LGUs, i.e., General Fund (100) and
Special Education Fund (200)

By program/project or by department/office, according to the
specific services rendered by a department/office, e.g.,
Executive Services-Mayors Office and Others

By allotment class, according to the class of the expenditure
item, i.e., Personal Services, Maintenance and Other Operating
Expenses, and Capital Outlays

By need for clearance, whether for further clearance or
authority prior to the release of funds (Needing Clearance), or
whether the release requires no further prior authority (Not
Needing Clearance)

2.6 Specify the unreleased portion of the LBM, the Needing Clearance
(NC), which can only be released upon receipt of and compliance
with certain documentary requirements, like the creation and
reclassification of position, payment of Retirement Gratuity and
Terminal Leave Benefits and purchase of motor vehicles,
computers, guns and ammunition, etc.

2.7 Reflect the not needing clearance in the LBM. These shall include
all budgetary requirements for all PPAs, reserve imposition, if
supported by a Sanggunian Resolution or if embedded in the
Appropriation Ordinance. The reserve imposition is to cover any
possible shortfall in revenue and to generate savings for the
department/office.

2.8 Record and provide copies of LBM releases. After the LBM is
approved by the LCE, the released amount shall be stamped with
the official seal of the LGU and shall be recorded in the proper
registry by the LBO and Local Accountant. Copies of the LBM as
approved shall be distributed, as follows:

179
Original - Local Budget Officer
Duplicate - Department Head
Triplicate - Local Accountant
Quadruplicate - Records

2.9 Release LBM for Supplemental Budgets (SBs). Enacted SBs shall
follow same process in the release of allotments. But for
augmentation of deficiencies in allotment from one object of
expenditure to another within the same class for respective offices
within the executive branch and Sanggunian or realignment of
savings from one expense class to another, the ARO shall be the
release document to effect the changes. The former can be done by
a new ordinance or resolution of the Sanggunian and the latter
requires the submission of a Supplemental Budget for authorization
by the Sanggunian.

Step 3. Prepare the Cash Program and Summary of Financial and
Physical Performance Targets

3.1 Prepare the cash program.

Determine a realistic cash inflow on a monthly basis. Use as
basis the actual inflow of revenues for the past three (3) years.
Consider the months where revenue is high, like when
payments of taxes become due, or months where revenue
collection is low. Use a line graph to show the high and low
points of revenue collection to provide a historical or empirical
basis of cash inflows.

Determine a realistic cash outflow on a monthly basis. Analyze
in detail the timing of expected payments affecting regular
operations (payment of PS and MOOE) and payments for the
acquisition of civil works under R.A. No. 9184 (land and land
improvements, building construction and acquisition of
equipment). Also, include in the projected cash outflows the
financial requirements for calamities.

Compute the difference between the cash inflows and outflows
within a given period, month by month to be more specific, that
will indicate a net cash flow. A projected cumulative net cash
flow will indicate the capacity to generate surplus and
conversely a cumulative negative cash flow will reveal the
amount of additional cash requirements to sustain operations.
180

3.1.1 Prepare a Statement of Cash Flow Forecast (SCFF). This
statement is a schedule of anticipated receipts and
disbursements of the LGU for the fiscal year with a quarterly
breakdown to show the beginning and ending cash balances
for each quarter.

The Local Treasurer shall prepare the first section of the
SCFF to show the schedule of all income collections and
other receipts derived from local and external sources.
The LBO shall prepare the second portion of the SCFF
for the whole LGU using as basis the data in column 2 of
the Detailed Financial and Physical Performance Targets
prepared by all department heads on a quarterly basis

Prepare the SCFF as basis of the statement of cash flow
forecast.

Identify the estimates of receipts from taxes (local and
eternal sources)
Consider the estimates of other revenues taking into
consideration the seasonality of operations and past
performances
Determine all regular and recurring expense
Identify and assess all accounts payables and
outstanding obligations due for payment
Determine schedule of project construction, project
cost estimates and schedule of progress billings,
amounts of payment during the year and cost of
mobilization.
Estimate payments for debt servicing
Consider other current costs of operations specially
non-recurring/unforeseen expenses.

3.1.2 Do a Cash Flow Analysis (CFA). The CFA is to be prepared
by the Local Treasurer and Local Accountant. Use CFA as a
cash flow monitoring tool to give up-to-date information on
the LGUs overall cash position, liquidity and solvency.

Analyze the actual flow of funds/revenues and pattern of
expenditures against the projections throughout the year.
181
Determine any cash overages/shortages on a quarterly
basis for purposes of having timely decisions in the use of
available cash.
Minimize the interval between the time when cash is
received and the time it is available for payment of valid
obligations.
Analyze the variances between actual collections and
disbursements against estimates indicated in the SCFF.

3.1.3 Determine over-collection of taxes and other revenues.
Substantial cash receipts or collections are indicative of high
tax collection efficiency. All positive variances shall be
submitted to the LCE for the preparation of a supplemental
budget, or for appropriation in the next budget year.

3.1.4 Determine overall under-collection of taxes and other
revenues. Any shortfall in revenue collection should signal
the deferment of non-priority expenditures and the non-
release of allotments indicated as reserve, for later release or
needing clearance under the LBM.

3.1.5 Identify over-spending and savings in expenditures. Avoid
cost overruns by spending within limits defined in the
budget. Proper timing and scheduling of payments are
necessary ingredients in avoiding overspending. Savings in
expenditures may be realized when proper economy
measures are imposed as policy.

3.1.6 Invest excess idle cash in productive investments. Keeping
excess cash on hand reduces both the growth and return on
investment. Invest idle cash in high-yielding, productive
investment at controlled risks taking into account the safety,
liquidity and effective return on investment. Placements in
short-term treasury bills, money market or time deposit
accounts will make idle cash more productive and generate
additional income for the LGU.

3.2 Prepare the Summary of Financial and Physical Performance
Targets. The department heads shall prepare the summary of
financial and physical performance targets for the entire calendar
year to serve as basis in comparing actual level of accomplishment
for the preceding year and knowing the available resources for the
budget year.
182

3.2.1 Hold a dialogue with staff to determine the financial and
physical targets for the calendar year using the This
Release amount in the LBM and all other allotments to be
released for the year.

3.2.2 Revisit the approved AIP for the year to determine what
PPAs are to be implemented with their corresponding major
final outputs.

3.2.3 Identify which department/office shall implement the PPAs
as authorized in the AIP and approved Appropriation
Ordinance.

3.2.4 Cross-check consistency of expenditure with the amount
provided in the LBP Forms No. 3 and 4, the former to
provide data on costs and the latter on the expected outputs
or targets for the calendar year.

3.3 Prepare the detailed financial and performance targets. This
document presents the quarterly breakdown of the financial
allocation that is needed to accomplish a specific level of targets.
It serves the following purposes:

To match available resources with the level of efforts to deliver
the goods/services or outputs of the department
To determine the timing and magnitude of additional releases.

3.4 Revise and adjust the Project Procurement Management Plan
(PPMP) and corresponding Annual Procurement Plan (APP).

Department heads of the LGU concerned shall adjust/revise the
individual PPMPs which were prepared during the budget
preparation phase where there are significant changes in the
amount as authorized by the Sanggunian. This amount shall be
matched with the amount as approved in the LBM. If the amount
is reduced, then there should be a corresponding reduction in the
quantity to be procured and vice versa. Consequently, the APP
shall be adjusted. In cases where the authorized amount in the
LBM is the same as the proposed amount submitted during budget
preparation, the PPMP/APP need not be adjusted.


183
Step 4. Obligate and Disburse Funds

Pursuant to the modified accrual system under the New Government
Accounting System (NGAS), obligations shall be taken up in the registry
(RAAO) as they are incurred (Please refer to COA Circular No. 2001-
005 dated 30 October 2001). Accordingly, expenditures and obligations
incurred during the fiscal year shall be taken up in the accounts of that
year.

Obligations already incurred but not yet paid (accounts payable) shall be
settled in accordance with existing budgeting, accounting and auditing
rules and regulations.

Step 5. Adjust cash program for shortages and overages.

The LFC, through the Local Treasurer, shall use the results of the cash
flow analysis as basis for adjusting the cash program and the financial
and physical targets.

5.1 Determine amounts considered as over-collection of taxes then
effect upward adjustments in the cash disbursement program to
match the increase in the cash receipts forecast. If this is not done,
a significant amount of cash will be idle at the end of the year.

5.2 Identify amounts considered as under-collection of taxes and
revenues. This is a signal that the original cash receipts forecast is
overstated. It becomes necessary to decrease the cash
disbursement program for the remaining months to prevent the
incurrence of a cash overdraft.

Step 6. Provide corrective actions for negative deviations.

The Local Finance Committee shall:

6.1 Compare the actual performance in both the financial and physical
accomplishments vis--vis the targets for the quarter.

6.2 If the actual financial performance is greater than the estimated
cost, it means that there was overspending beyond the available
resources. This reflects inefficiency if the actual physical
performance is below the target. This needs corrective action.

184
6.3 If the actual financial performance is lower than the estimated cost;
it means that the estimated cost was overstated and performance is
ineffective if the physical targets were not met. This also needs
corrective action.

6.4 If the actual physical performance is greater than the target; it
indicates that financial resources were utilized to the maximum
resulting in better than ordinary performance. This is assuming that
targets were realistically set and not understated. In this case, no
corrective action is needed.

6.5 If the actual physical performance is lower than the target; it
indicates that the targets were overambitious or the people worked
below par. Corrective action is needed in this case.

6.6 Let concerned department heads explain substantial negative
deviations and let them further recommend remedial measures to
address negative deviations.

6.7 Let concerned department heads prepare adjustments in the original
targets to catch up with plans for the fiscal year.

6.8 Proposed corrective action shall be submitted by concerned
department heads to the LPDC for review and evaluation after
which it shall be discussed with the LFC members for final
deliberation. The proposed corrective action is then recommended
by the LFC to the LCE for approval. Upon approval, the
concerned department head may implement corrective action to be
on track with planned targets for the fiscal year.

6.9 In accomplishing the SFPPT and DFPPT, Department/Office
Heads with the assistance of their staff, should focus on the core
functions of their department/office and on the delivery of high
impact activities at reasonable costs and qualities. Allocation of
resources and expenditure management are directed towards results
and accounts for performance.

The monitoring of actual performance vis--vis the targets set at
the start of the year, as contained in LBE Form No. 3 and 3A, is an
important aspect in budget execution.



185
6.10 The Financial and Physical Performance Targets of each
department/office aim to:

Establish a means of measuring performance and corresponding
level of efforts in the implementation of the PPA of each
department/office;

Encourage efficiency, effectiveness and accountability of the
department/office within the limits of scarce public sector
resource; and

Institutionalize the shift from input-based to performance-based
budgeting.

The LPDC and the LBO are tasked to monitor and evaluate the
physical and financial performances of all PPAs of line
departments, respectively.


























186

7.0 Local Budget Execution Forms
















































STATEMENT
OF
CASH FLOW
FORECAST
FORM
PRESCRIBED
BY BLGF

CASH FLOW
ANALYSIS
(CFA)
LBE Form No. 3-A

DETAILED
FINANCIAL
AND PHYSICAL
PERFORMANCE
TARGETS
( DFPPT)
LBE Form No. 3
SUMMARY OF
FINANCIAL
AND PHYSICAL
PERFORMANCE
TARGETS
(SFPPT )
LBE Form No. 1

LOCAL
BUDGET
MATRIX
(LBM)

CASH
RECEIPTS
FORECAST
(CRF)


CASH
DISBURSEMENTS
FORECAST
(CDF)
LBE Form No. 2

ALLOTMENT
RELEASE
ORDER (ARO)
187


LBE Form No. 1

LOCAL BUDGET MATRIX
FY_________
Annual Budget
Supplemental Budget
LOCAL GOVERNMENT UNIT: ________________
FUND: ___________
PROGRAM/ PROJECT/
ACTIVITY
(DEPARTMENT/OFFICE)
AUTHORIZED
APPROPRIATION
RESERVE
NOT NEEDING CLEARANCE
NEEDING
CLEARANCE
P
S
M
O
O
E
C
O
TOTAL
P
S
M
O
O
E
C
O
TOTAL
THIS
RELEASE
FOR
LATER
RELEASE
P
S
M
O
O
E
C
O
TOTAL
(1) (2) (3) (4) (5)

a.

b.

c.

d.

TOTAL


Recommended by: Approved:

___________________ ___________________
Local Budget Officer Local Chief Executive





































INSTRUCTIONS:

The LOCAL BUDGET MATRIX shall be accomplished as follows:

Local Government Unit Name of the Province/City/Municipality implementing the budget.
Source of Appropriation Indicate the appropriation source, i.e. either annual or supplemental budget.
Fund Fund codes under the NGAs for Local Government Units
100 General Fund
200 Special Education Fund
300 Trust Fund

Col. 1 Program/Project/Activity Pertains to the f unctional grouping of appropriations and the services rendered by the
implementing units of the LGU to wit:
Executive Services Accounting and Internal Audit Services
Legislative Services Budget and Management Services
Delivery of Social Services Planning, Monitoring & Evaluation Services
Financial Services Delivery of Health Services
Legal Services Delivery of Veterinary Services
Assessment Services Delivery of Engineering Services
Delivery of Social Services Delivery of Agricultural Services

Col. 2 Authorized Appropriation This column pertains to the appropriations in the approved budget, or from the
supplemental budget.

Col. 3 Reserve This column shall reflect the amount set aside to provide contingencies and
emergencies which may later arise in the execution of the budget.

Col. 4 Not Needing Clearance This column shall include all other budgetary requirements that do not fall under the
NC column. This shall be separated into: This Release and For Later
Release

Col. 5 Needing Clearance This column pertains to the portion of the departments budget which can only be
released upon clearance and/or compliance with documentary requirements.

The last page of the LBM shall be machine-validated with an amount that shall tally with the amount of the This Release.
The LBM shall be signed by the Local Budget Officer and Local Chief Executive.
188

LBE Form No. 2

ALLOTMENT RELEASE ORDER
For Fiscal Year_________

Local Government Unit

Fund Code Appropriation Source

Annual Budget

Supplemental Budget
Department/Office

Purpose

Particulars
Object Class/
Account Code
Amount
Authorized










Amount in Words

Notes

The allotments herein authorized shall be used solely for the purposes indicated and disbursements therefrom shall be
made in accordance with existing budgeting, accounting and auditing rules and regulations. It is the primary responsibility of
the head of the Department/ Office or Unit concerned to keep expenditures within the limits of the amount allotted.



__________________ _______________________________
Date of Issue Local Chief Executive

Page ___ of ___ page(s) ARO No. ________________























INSTRUCTIONS:

The Allotment Release Order (ARO) shall be accomplished by the Local Budget Officers as follows:

Caption
For the Fiscal Year The current budget year
Local Government Unit Name of the province/city/municipality concerned
Department /Office Name of the requesting department/office of the LGU
Fund/Code Fund/code under the NGAs for Local Government Units
100 General Fund
200 Special Education Fund
300 Trust Fund
Appropriation Source The appropriation source, i.e. either annual/supplemental budget
Purpose Brief explanation of purpose or other information or details pertaining to
Particulars This column shall include the following:
Program/Activity/Project
Allotment Class
Object of Expenditure
Object Class/Account Code The account code of the object of expenditure based on the NGAs for LGUs (Please
refer to COA Circular 2008-001 dated 29 January 2008)
Amount Authorized Amount of allotment to be released
Amount in Words Amount in words of the total amount authorized
Notes Legal bases for such release and/or the period of validity of the allotment
Date of Issue Date of the preparation of ARO
Approved by Name and signature of the LCE approving the release of the allotment
Page ___ of ___ page(s) Number of pages of the ARO.
ARO No. Assign ARO Number to the form.
189

LBE Form No. 3

SUMMARY OF FINANCIAL AND PHYSICAL PERFORMANCE TARGETS


LGU : _____________________________
Department/Office: _____________________________
MFO : _____________________________

Program/ Project/ Activity Total Cost
Performance
Indicator
Prior Year
(ACTUAL)
Physical
Targets
Remarks
(1) (2) (3) (4) (5) (6)









Prepared by: Approved by:

_________________________ _________________________
Department Head Local Chief Executive














































INSTRUCTIONS:

The report on physical performance targets shall be accomplished as follows:

Local Government Unit Name of the province/city/municipality concerned.
Department/Office Name of the implementing department/office, e.s. Governor's Office
Major Final Output Services provided by the different department and offices to external clients, such as
but not limited to:

Executive Services Agricultural Services
Legislative Services Social Services
Veterinary Services Engineering Services
Planning, Monitoring & Evaluation Services
Health Services Budget and Management Services

Services which are not directly consumed by the external clients such as the
following shall be subsumed under executive services:

Ex. MFO: Executive Services ( Accounting and Internal Services)
P/P/A: Preparation and submission of reports
PI : 90% Financial report submitted on time
Procurement Services
Accounting and Internal Services
Financial Services
Legal Services
Assessment Services

(Col. 1) Program/Project/Activity Programs, projects and activities which are identifiable to the final output.
Example: MFO: Agricultural Services ; PPA; Swine dispersal program

(Col. 2) Budget Allocation Amount approved for the current year by allotment class

(Col. 3) Performance Indicators Performance standards/ criteria and indicators set that will be
accomplished by the LGU ( Ex. No. of beneficiaries of swine dispersal program)

(Col. 4) Prior Year's Actual Accomplishment during the preceding year.
Accomplishments
(Col. 5) Current Year Targets Estimates/targets for each performance indicator to be accomplished
for the current year.

(Col. 6) Remarks Other information relative to the performance standards

* This document shall be signed by the appropriate signatories- the Department Head and the Local Chief Executive
* This shall be submitted to the Local Budget Officer upon approval of the Annual Budget.
190



LBE Form No. 3A

DETAILED FINANCIAL AND PHYSICAL PERFORMANCE TARGETS


LGU : _____________________________
Department/Office: _____________________________
MFO : _____________________________

PROGRAM/ PROJECT/
ACTIVITY/Performance
Indicator/s
(1)
FINANCIAL ALLOCATION
(2)
PHYSICAL TARGETS
(3)
1
st

Quarter
2
nd

Quarter
3
rd

Quarter
4
th

Quarter
1
st

Quarter
2
nd

Quarter
3
rd

Quarter
4
th

Quarter









Prepared by: Approved by:

_________________________ _________________________
Department Head Local Chief Executive





















INSTRUCTIONS:

The Detailed Financial and Physical Performance Targets shall be accomplished as follows:

Local Government Unit Name of the province/city/municipality concerned.
Department/Office Name of the implementing department/office, e.g. Governor's Office
Major Final Output Services provided by the different departments and offices to external clients,
such as but not limited to:

Executive Services Agricultural Services
Legislative Services Social Services
Veterinary Services Engineering Services
Planning, Monitoring & Evaluation Services Budget and Management
Services
Health Services

Services which are not directly consumed by the external clients such as the
following shall be subsumed under the executive services

Ex. MFO: Executive Services (Accounting and Internal Services)
P/P/A: Preparation and submission of reports
PI: 90% Financial report submitted on time

Procurement Services
Accounting and Internal Services
Financial Services
Legal Services
Assessment Services

(Col. 1) Programs, projects and activities which are identifiable to the final output,
example:
MFO: Agricultural Services ; PPA; Swine dispersal program
Indicate for each PPA the Performance Indicator/s

(Col. 2) Quarterly Financial Allocation based on the currently approved budget for the
department.

(Col. 3) Quarterly Physical Targets for each performance indicator per PPA.

* This should be submitted to the Local Budget Officer as an attachment to LBE Form No. 3 (SFPPT).
191



Chapter 5. Budget Accountability Phase


1.0 Introduction
Accounting for the Budget
Audit of Accounts

2.0 Legal Basis of Budget Accountability

3.0 Key Players in Budget Accountability

4.0 The Budget Accountability Flow Chart

5.0 Accounting for the Budget
Step 1. Monitor Revenue and Expenditure
1.1 Submit Accountability Reports
1.2 Monitor Local Budget Implementation
Step 2. Evaluate Performance of Each Department/Office
2.1 Review/Evaluate Performance
2.2 Follow Guidelines/Procedures in Evaluating
Department/Office Performance
2.3 Procedures for the Evaluation of LGU Performance

6.0 Local Budget Accountability Forms
LBAc Form No. 1 Quarterly Report of Income
LBAc Form No. 2 Quarterly Financial Report of Operations
LBAc Form No. 3 Quarterly Physical Report of Operations
LBAc Form No. 4 Statement of Receipts and Expenditures

7.0 Local Budget Performance Evaluation Forms
LBPE Form No. 1 Physical Performance Evaluation Form
LBPE Form No. 2 Financial Performance Evaluation Form

8.0 Illustrative Presentation of Performance Evaluation






192
Budget Accountability Phase

1.0 Introduction

Budget accountability is the last phase of the budget process. It is
essentially accounting for the performance of the LGU in terms of
income/revenue generation and resource utilization for the
implementation of its PPAs for the year.

It encompasses the recording and reporting of estimated and actual
income and expenditures as well as the monitoring and evaluation of the
LGUs performance vis--vis prescribed standards/policies and planned
targets. Basically, it is the evaluation of the LGUs performance in the
execution of its budget.

In its broadest sense, budget accountability has two inter-related aspects:

1. Accounting for the budget. This is a management control
technique used to assist in controlling expenditures and tracking
revenues. This is a mechanism provided under the Local
Government Code by which the LCE, the Sanggunian and their
constituents will be apprised of the status of the implementation of
the PPAs funded in the budget. It covers the analysis of financial
transactions, recording of budgetary accounts in the registries,
recording in the books of accounts the receipts/income and deposits
and the disbursements and financial reporting. It encompasses the
monitoring and evaluation of the physical and financial
performance of the LGU relative to the accomplishment of its
PPAs as funded in the budget.

The results of the monitoring and evaluation process will enable
the officials concerned to redirect or plan their next moves not only
during the remaining period of budget execution but also during
the planning/programming and budget preparation phases.

2. Audit of accounts. This pertains to the examination of the
legality and propriety of the obligations and expenditures incurred
in the process of executing the budget. The results will complete
the whole evaluation of the budget performance of the LGU.


193
This Manual shall focus its discussion on the accounting for the budget
aspect. It is understood, however, that in the execution of the budget, the
officials and employees involved shall strictly observe the law and the
rules and regulations of COA, DBM, and other oversight agencies.


2.0 Legal Basis

















3.0 Key Players in Budget Accountability

3.1. Local Chief Executive The LCE shall be primarily responsible
for the execution of the annual and supplemental budgets and the
accountability therefor (Section 320, R.A. No. 7160).

Specifically, the LCE shall:

Ensure that all taxes and other revenues of the LGU are
collected, and that local government funds are applied to the
payment of expenses and settlement of obligations, in
accordance with law or ordinance (Sections 444 [b][3][iii];
455 [b][3][iii]; 465 [b][3][iii], R.A. No. 7160).

Cause the periodic examination of books, records, and other
documents maintained by accountable officials, agents, or
employees of the LGU to ensure that income collection and
disbursements are properly recorded (Sections 444 [b][1][xi];
455 [b][1][xi]; 465 [b][1][xi], R.A. No. 7160).
Persons Accountable for Local Government Funds. Any officer of
the local government unit whose duty permits or requires the
possession or custody of local government funds shall be accountable
and responsible for the safekeeping thereof in conformity with the
provisions of this Title. Other local officers, who, though not
accountable by the nature of their duties, may likewise be held
accountable and responsible for local government funds through their
participation in the use or application thereof. (Section 340, R.A. No.
7160).

Fiscal responsibility shall be shared by all those exercising authority
over the financial affairs, transactions, and operations of the local
government unit. (Section.305, R.A. No. 7160).


194
Ensure that accountable officials are able to submit periodic
reports in such forms as may be required under this Manual and
by applicable Rules (Sections 444 [b][1][x]; 455 [b][1][x]; 465
[b][1][x], R.A. No.7160).

Ensure that all executive officials and employees faithfully
discharge their duties and functions as provided by law and the
Local Government Code (Sections 444 [b][1][x]; 455
[b][1][x]; 465 [b][1][x], R.A. No.7160).

Submit to the Sanggunian, on or before March 31 of each year,
an annual report covering the immediately preceding calendar
year which shall contain among others the budgetary/financial
performance as well as physical accomplishments of the LGU
(Section 97, R.A. No.7160 and Article 189 Rule XXIV, IRR of
R.A. No. 7160).

3.2 Local Treasurer The Local Treasurer shall:

Collect all local taxes, fees, and charges (Section 170, R.A. No.
7160);

Report regularly to the LCE on the tax collection efforts in the
LGU (Section 470 [b], R.A. No. 7160);

Advise the LCE, the Sanggunian, and other local and national
government officials regarding the disposition of local
government funds, and on such other matters relative to public
finance (Section 470 [d][1], R.A. No. 7160);

Take custody and exercise proper management of the funds of
the LGU (Section 470 [d][2], R.A. No. 7160);

Take charge of the disbursement of all local government funds
and such other funds the custody of which may be entrusted to
him by law or other competent authority (Section 470 [d][3],
R.A. No. 7160);

Submit periodic reports to the LCE through the LFC in such
forms prescribed under this Manual;

195
Exercise such other powers and perform such other duties and
functions as may be prescribed by law or ordinance (Section
470 [e], R.A. No. 7160).

3.3 Local Accountant The Local Accountant shall:

Prepare and submit financial statements to the LCE and to the
Sanggunian (Section 474 [b][2], R.A. No. 7160);

Apprise the Sanggunian and other local government officials
concerned on the financial condition and operations of the LGU
(Section 474 [b][3], R.A. No. 7160);

Install and maintain on internal audit system in the LGU
concerned;

Record all financial transactions in the appropriate journals and
keep all supporting documents attached thereto as follows;

statement of cash advances, liquidation, salaries,
allowances, reimbursement and remittances pertaining to
the LGU;

statement of journal entry vouchers and liquidation of the
same and other adjustments related thereto;

maintain individual ledger for officials and employees of
the LGU pertaining to payroll and deductions.

Record and post in the index cards details of purchased
furniture, fixture and equipment, including disposal thereof, if
any;

Maintain and update all general and subsidiary ledgers;

Prepare and submit periodic reports to the LCE through the
LFC in such forms prescribed under this Manual.

3.4 Local Budget Officer The LBO shall:

Certify to the availability of appropriations and allotments to
which expenditures and obligations may be properly charged;
196

Prepare and submit periodic reports to the LCE through the
LFC and to the DBM in such forms prescribed under this
Manual.

3.5 Planning and Development Coordinator - The Planning and
Development Coordinator shall:

Monitor and evaluate the implementation of the development
programs and projects and activities of the various departments
in accordance with the approved development plan (Section 476
[b][4], R.A. No. 7160);

Analyze the income and expenditure patterns, and formulate
and recommend fiscal plans and policies for consideration of
the LFC (Section 476 [b][6], R.A. No. 7160);

Prepare and submit periodic reports to the LCE through the
LFC in such forms prescribed under this Manual.

3.6 Heads of Departments/Offices The Heads of
departments/offices shall:

Monitor the implementation of the PPAs of their respective
departments/offices to ensure adherence to plans, targets and
standards;

Prepare and submit periodic reports to the LFC in such forms as
may be prescribed under this Manual.

3.7 Local Finance Committee The LFC shall:

Conduct a semi-annual review and general examination of cost
and accomplishments against performance standards in
undertaking development projects (Section 316 [h], R.A. No.
7160).

Post the semi-annual and general examination report in
conspicuous and accessible places in the LGU and furnish a
copy of this report to the LCE and the Sanggunian concerned
(Section 316 [h], R.A. No. 7160).


197
4.0 The Budget Accountability Flow Chart


















The chart above summarizes the role of the budget accountability phase
in the planning/programming and budgeting cycle, as follows:

provides the required feedback for PPA implementation adjustments
during budget execution;

provides information to the general public on the performance of the
LGU;

provides the necessary inputs to the planning and programming of
PPAs for inclusion in the budget during budget preparation.


5.0 Accounting for the Budget

Accounting for the local budget involves two steps: (1) monitoring and
(2) performance evaluation.

Step 1. Monitor Income and Expenditure

The budgets of the LGU are accounted for on the first day of the fiscal
year. The estimated income and appropriations in amounts approved and
reviewed are recorded in the books where they shall be compared with
the actual collections and disbursements for the same period.
Budget
Execution

Budget
Accountability

Planning/
Programming
Monitoring
of Outputs/
Results
of PPAs
Performance
Evaluation
(outputs vs.
targets)
Planning
Programming
of PPAs
Implementation
of PPAs

Budget
Preparation
Resource
Allocation to
PPAs
Constituents
Results
198

Expenditures are tracked and monitored vis--vis the outputs and
accomplishments.

1.1 Submit Accountability Reports

The Treasurer, the Accountant, the Budget Officer, the Planning
and Development Officer, and other department/office heads are
required to submit the following accountability reports to the LFC
and to the DBM:

LBAc Form No. 1 Quarterly Report of Income
LBAc Form No. 2 Quarterly Financial Report of Operations
LBAc Form No. 3 Quarterly Physical Report of Operations
LBAc Form No. 4 Statement of Receipts and Expenditures

Accountability reports are imperative and useful documents for
monitoring purposes. They establish the performance record of the
various departments and offices of the LGU.

1.2 Monitor Local Budget Implementation

Monitoring the implementation of the local budget shall involve
the following:

1.2.1 Monitoring of Income

The income to be monitored shall be based on the
approved and reviewed annual and supplemental or re-
enacted budgets.

The Local Accountant shall record the actual income
collections based on the Treasurers Report of Daily
Collections.

The Local Accountant shall prepare the Quarterly
Report of Income. This report keeps track of the income
for each month of the quarter and shows the variance
between estimated income and actual income collected as
of the end of the quarter under report.



199
1.2.2 Monitoring of Appropriations, Allotments and Obligations

The LBO shall keep track of the appropriations released
through allotments and subsequently obligated by the
various offices and departments for the PPAs funded in
the budget, ensuring that funds are used exclusively for
the specific purpose/s for which they have been
appropriated pursuant to Sections 336 and 305 (a) of
R.A. No. 7160.

The LBO and the Local Accountant shall ensure that
lawful expenditures and obligations incurred during a
fiscal year shall be taken up in the accounts of that year
pursuant to Section 350 of R.A. No. 7160.

The LBO shall prepare a certified Quarterly Financial
Report of Operations that would reflect obligations
incurred vis--vis the released allotments and available
appropriations. This will give a picture of the efficiency
and effectiveness of the rate of utilization of
appropriations by the various departments of the LGU.

The Local Treasurer, LBO and the Local Accountant
shall prepare a Statement of Receipts and Expenditures
(Summary of Income and Expenditures pursuant to
Section 352 of R.A. No. 7160) for the fiscal year.

The Local Treasurer, Local Accountant, LBO and
other accountable officials shall post the SRE in at
least three (3) publicly accessible and conspicuous
places in the LGU within 30 days from end of the
fiscal year.

A copy of the SRE furnished to the LBO shall be
submitted to the DBM through its Regional Office
within the same period.

1.2.3 Monitoring of Physical Outputs and Accomplishments

Each Department/Office Head shall prepare a Quarterly
Physical Report of Operations where actual performance
per activity is shown against the target output.

200
Step 2. Evaluate Performance of Each Department/Office

The other component of accounting for the budget is the assessment of
the performance of the LGU primarily through a review of
outputs/accomplishments against performance standards and targets.

Pursuant to Sections 316 and 320 of R.A. No. 7160, the LFC and LCE are
tasked to conduct a semi-annual review and general examination of cost
and accomplishments against performance standards applied in the
implementation of development projects and delivery of basic services.

The LFC is also mandated to:

determine the levels of income for the ensuing fiscal year;
recommend to the LCE the levels of expenditures and their proper
allocation to each PPA; and
assist the Sanggunian in the analysis and review of the annual and
supplemental budgets of its component LGUs.

While these other tasks pertain to responsibilities during the budget
preparation and authorization phases, they cannot be faithfully performed
without a clear knowledge of the status of the LGU budget performance
in the current and prior years.

The LFC and LCE, therefore, shall evaluate not only the implementation
of development projects but also that of other PPAs as well.

The Committee shall report the results of the evaluation to the LCE, the
Sanggunian, oversight agencies, Non-Government Organizations
(NGOs), and other observers. The report shall be posted in the website of
the LGU, if any, and in publicly accessible and conspicuous places.

The results of performance review and evaluation will guide the LCE and
the Sanggunian on the appropriate actions to take with respect to the
performance of the offices and departments of the LGU. The evaluation
results will also serve as bases for reevaluating current policies and
practices. The LGU may either sustain good performance or remedy
shortcomings to enable it to be on track in its plans for the year and the
years ahead.

The following criteria/tests should guide the LFC and LCE in the review
and evaluation of performance:

201
Results-oriented: focuses on outputs and outcomes;
Selective: concentrates on most important indicators of performance;
Useful: provides information of value to the LGU and decision-
makers;
Accessible: provides periodic information about results; and
Reliable: provides accurate, consistent information over time.

Each department/office shall be a responsibility/cost center. The heads of
departments or offices are therefore responsible for the results of all the
PPAs performed in their respective departments/offices.

2.1 Review/Evaluate Performance

2.1.1 Evaluation of the physical, financial and income
performance.

The performance evaluation shall be based on the following
local budget accountability reports:

LBAc Form No. 1 - Quarterly Report of Income
LBAc Form No. 2 - Quarterly Financial Report of
Operations
LBAc Form No. 3 - Quarterly Physical Report of
Operations
LBAc Form No. 4 - Statement of Receipts and
Expenditures

The forms to be accomplished for the performance
evaluation to be duly signed by the members of the LFC,
shall be as follows:

LBPE Form No. 1 - Physical Performance Evaluation
Form
LBPE Form No. 2 - Financial Performance Evaluation
Form

2.1.2 Consultation with department/office heads and stakeholders

This is done for clarification and validation purposes of the
actual performance against targets.


202
2.2 Follow Guidelines/Procedures in Evaluating Department/
Office Performance

2.2.1 A midyear (January 1 to June 30) and annual (January to
December each year) performance evaluation of the physical
and financial accomplishments by department/office and the
entire LGU shall be conducted by the LFC for submission to
the LCE on or before August 31 of the current year and
February 28 of the next year, respectively.

2.2.2 The evaluation shall be based on performance targets vs.
actual physical accomplishments and expenditures vs.
released allotments.

2.2.3 The data required for the performance evaluation shall be
taken from the quarterly budget accountability reports.

2.2.4 The evaluation shall include the determination of the costs
incurred in the production of MFO using actual obligations
and outputs.

2.2.5 The following suggested weights may be used in the
performance evaluation of departments/offices:

Physical Performance 70%
Financial Performance 30%
-------------------
Total 100%
=====
The department MFOs/PPAs to be measured shall be
assigned percentage (%) weights. The total % weights for all
MFOs/Activities shall be equal to 100%.

2.2.6 A scoring system will give points to the accomplishment in
physical and financial variables. The cause of the variables
(negative slippage) in performance will be taken into
account.

The scoring system below may be used in rating the
department performance. The maximum is 15 points
(without weights).


203














Legend: O Outstanding S Satisfactory P Poor
VS Very Satisfactory F Fair


2.3 Procedures for the Evaluation of LGU Performance by
Department/Office

2.3.1 Compute the Total Points for Physical Accomplishment per
department/office.

Assign the relative weight for each MFO/PPA.
Compute the physical percentage accomplishment
(actual/target) for each MFO/PPA.
Assign the corresponding point for the physical
accomplishment per MFO/PPA using the scoring system.
Get the weighted score (WSp) for each MFO/Activity by
multiplying the points score with the corresponding %
weight for each MFO/Activity.
Get the total weighted score (TWSp) by adding up the
individual weighted scores for all MFOs/Activities.
Multiply the TWSp by 70% to get the overall physical
performance.

2.3.2 Compute the Total Points for Financial Accomplishment.

Assign the relative weight for each MFO/activity.
Compute the absorptive capacity (actual obligation
incurred/obligational authority) for each MFO/activity.
Assign the corresponding points for the absorptive
capacity per MFO/activity using the scoring system.
Rate of
Accomplishments
Physical Financial
Adj.
Rate
Points
Adj.
Rate
Points
110 120 % O 5 P 1
100 109.9% VS 4 F 2
90 99.9 % S 3 S 3
80 89.9% F 2 VS 4
Below 80 % P 1 O 5
204
Get the weighted score (WSf) for each MFO/Activity by
multiplying the points score with the corresponding %
weight for each MFO/Activity.
Get the total weighted score (TWSp) by adding up
individual weighted scores for all MFOs/Activities.
Multiply the TWSp by 30% to get the overall physical
performance.

2.3.3 Compute the Overall Performance of the department/office.

Compute the total overall weighted score (TOWS) for the
accomplishments (physical and financial).
The overall performance of the department/office shall be
based on the following adjectival rating:


TOWS or Overall Score Performance Rating
4.0 5.0 Outstanding (O)
3.0 3.9 Very Satisfactory (VS)
2.0 2.9 Satisfactory (S)
1.0 1.9 Fair (F)
Below 1.0 Poor (P)

2.3.4 Compute the Overall Performance of the LGU:

Compute the average TOWS for the physical
accomplishments of all offices/departments and multiply by
70% to get the overall physical performance.
Compute the average TOWS for the financial
accomplishments of all offices/departments and multiply by
30% to get the overall financial performance.
Sum up all the final scores to get the TOWS. The overall
performance of the LGU shall be based on the adjectival
rating presented in Computing the Overall performance of
the department/office (No. 2.3.3)

An illustrative presentation of a Department/Office
Performance Evaluation (Financial/Physical
Accomplishment) is shown on page 213.


205
2.3.5 Prepare the Performance Review Report (PRR).

The PRR should include a brief description of a
department/office and overall LGU performance.

Here is a sample outline of the report:

Executive Summary

A. Objectives (What is going to be evaluated or
reviewed)

B. Background

1. MFOs or PPAs covered by the review from January to
June
2. Target/s (physical, income) for the period
3. Allotment corresponding to 50% of the Annual
Budget plus other releases
4. Actual cost equivalent to the amount in the SAOB as
of June 30
5. Other information affecting agency implementation

C. Summary of Findings

1. Description of the LGU performance discussing the
tabulated scores and ratings
2. Explanation of deviations (negative or positive)
3. Measures undertaken for negative deviations

D. Recommendations

1. Measures to be undertaken for negative deviations
2. Measures to improve organization, staffing, systems
and procedures, and refocusing of programs and
priorities







206
6.0 LOCAL BUDGET ACCOUNTABILITY FORMS



LBAc Form No. 1

QUARTERLY REPORT OF INCOME
For the Quarter Ending __________


Account
Title/
Description
of Income
Account
Code
Estimated
Income
Previous
Quarter
Estimated
Income
This Quarter
Total
Estimated
Income
to Date
Actual Income
for the Quarter
Total
Actual
Income
to Date
Variance

Remarks 1st
Month
2nd
Month
3rd
Month
Amount %
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)













Prepared by: Certified Correct:

___________________ __________ ____________________ __________
LOCAL TREASURER Date LOCAL ACCOUNTANT Date






















INSTRUCTIONS:

Column (1) shall refer to the appropriate account classification and nature of the actual income generated during the
period as appearing in Column (3) to (9) in accordance with the New Government Accounting System
(NGAS), i.e.,
Other Taxes
- Community Tax
- Share from Internal Revenue Collection
- Share from Expanded Value Added Tax
- Share from National Wealth

Column (2) shall denote the numerical code per NGAS of the income classification in Column (1).

Column (3) shall indicate the estimated income of previous quarter.

Column (4) shall indicate the estimated income of the current quarter reported.

Column (5) shall refer to the estimated income from January to the end of the quarter reported.

Columns (6) to (8) shall refer to the actual income realized during the three months of the quarter reported, while Column
(9) shall indicate the cumulative total of each income category from January 1 to the end of the quarter
reported. Said total should tally with the income account per Trial Balance as of even date.

Column (10) shall indicate the difference between the estimated income and actual income to date (Col.9 Col.5).
Column (11) shall indicate the percentage increase/(decrease) in the income (Col. 10 / Col. 5)
Column (12) shall refer to additional information/reasons for material increase or decrease of actual income realized
during the period compared with estimates.

This report shall be submitted directly to the Local Finance Committee thru the Local Budget Officer on or before the 20th
day of the month following the quarter reported.
207



LBAc Form No. 2
QUARTERLY FINANCIAL REPORT OF OPERATIONS
For the Quarter Ending ______________
MFO/
PPA
Implementing
Unit
Appropriation Allotment Released Balance
of
Appro-
priation
Obligations Incurred
Unobligated
Allotment

Remarks
Continuing Current Total
Previous
Quarters
This
Quarter
Total
Previous
Quarters
This
Quarter
Total
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (`11) (12) (13) (14)











Certified Correct:


_______________________ ____________
LOCAL BUDGET OFFICER Date






















INSTRUCTIONS:

Column (1) shall refer to the MFO and PPA Code of the activity as listed down in the General Fund Budget.

Column (2) shall refer to the implementing unit (i.e. General Services Department, Accounting Department, etc.).

Column (3) shall refer to the unreleased appropriation of the past year which can still be released during the current year.

Column (4) shall indicate the current years appropriation in the approved budget, whether from the annual budget or from
supplemental budgets.

Column (5) shall refer to the total appropriation (Col. 3 + Col. 4).

Column (6) shall refer to the current years allotment released in the previous quarters and prior years unobligated
allotment. The prior years unobligated allotment and obligations shall be shown separately for full disclosure.

Column (7) shall refer to the allotment released during the quarter being reported.

Column (8) shall refer to the total allotment released as of end of the quarter being reported (Col. 6 + Col. 7).

Column (9) shall refer to the unreleased appropriation (Col. 5 Col. 8) as of end of the quarter being reported.

Column (10) shall refer to the current year obligations incurred in the previous quarters as recorded in the Registry of
Allotment and Obligation (RAO).

Column (11) shall refer to the obligations incurred during the quarter being reported as recorded in the RAO.

Column (12) shall refer to the total obligations incurred as of end of the quarter being reported (Col. 10 + Col. 11).

Column (13) shall refer to the unobligated allotment (Col. 8 Col. 12) which should tally with the balance shown in the
Statement of Allotments, Obligations, and Balances as of end of the quarter being reported.

Column (14) shall contain other relevant information for which no appropriate column is provided.

This report shall be submitted directly to the Local Finance Committee on or before the 20th day of the month following the
quarter being reported.
208



LBAc Form No. 3

QUARTERLY PHYSICAL REPORT OF OPERATIONS
For the Quarter Ending ___________

Department/Office: __________________

MFO/
PPA

Major Final
Output

Performance
Indicator
Target Output Actual Performance Variance

Previous
Quarters
This
Quarter
Total
Previous
Quarters
This
Quarter
Total Output % Remarks
(1)

(2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)










Prepared by:


_______________________ ___________________________________ ____________
DEPARTMENT HEAD LOCAL PLANNING & DEVELOPMENT OFFICER Date
























INSTRUCTIONS:

Column (1) shall refer to the MFO and PPA Code of the activity as listed down in the General Fund Budget.

Column (2) shall refer to the Major Final Output (MFOs) - goods and services that a department is mandated to deliver to
external clients through the implementation of the PPA.

Column (3) refers to the performance indicator - predetermined measure of the results of an activity against a standard of
performance required to achieve set policy objectives within a given period.

Column (4) refers to the cumulative target output as of the previous quarter.

Column (5) refers to the target output during the quarter being reported.

Column (6) shall refer to the total target output (Col. 4 + Col. 5) as of end of the quarter being reported.

Column (7) refers to the actual performance as of the previous quarter.

Column (8) refers to the actual performance during the quarter being reported.

Column (9) refers to the total actual performance (Col. 7 + Col. 8) as of end of the quarter reported

Column (10) refers to the variance between the target and actual accomplishments (Col. 9 Col. 6)

Column (11) refers to the variance expressed in percentage (Col. 10 / Col. 6)

Column (12) shall cover other relevant information/reasons for increase or decrease in actual performance vis--vis target
performance.

This report shall be submitted to the Local Finance Committee thru the Local Budget Officer on or before the 20th day of
the month following the quarter reported. Consolidated report shall be prepared by the Local Budget Officer.
209


LBAc Form No. 4


STATEMENT OF RECEIPTS AND EXPENDITURES
For the Fiscal Year Ending __________



Province/City/Municipality: ______________

Particulars
Account
Code
(NGAS)
Amounts Variance
Remarks
Estimate Actual Amounts %
(1) (2) (3) (4) (5) (6) (7)
I. Beginning Cash Balance


II. Receipts:


A. Local Sources


1. Tax Revenue


a. Real Property Tax


b. Special Education Tax


c. Other Local Taxes


Total Tax Revenue


2. Non-Tax Revenue


a. Regulatory Fees


1. License Fees


2. Permit Fees


3. Other Fees


b. Business and Service Income


c. Other Income/Receipts


Total Non-Tax Revenue


B. External Sources


1. Share from National Internal Revenue
Taxes (IRA)


2. Share from GOCCs


3. Other Share from National Tax Collection


a. Share from Ecozone


b. Share from EVAT


c. Share from National Wealth


d. Share from Tobacco Excise Tax


4. Extraordinary Receipts


a. Grants and Donations


b. Other Subsidy Income


5. Inter-local Transfers


a. Subsidy from LGUs


b. Subsidy from Other Funds


6. Capital/Investment Receipts


a. Gain on Sale of Assets


b. Gain on Investments


C. Receipts from Loans and Borrowings


Total Receipts ( I + II )














210
Continuation of LBAc Form No. 4



III. Expenditures


A. General Services


B. Social Services


C. Economic Services


D. Other Services


Total Expenditures





IV. Ending Cash Balance ( I + II ) - III



Certified Correct:


_______________________ _______________________
LOCAL TREASURER LOCAL ACCOUNTANT
































INSTRUCTIONS:

Column (1) shall refer to the details of the income/receipts and expenditures. Beginning cash balance shall be net of
amounts earmarked for specific purposes {e.g., continuing appropriations, 20% Development Fund, payables,
others (restricted funds)}.

Column (2) shall refer to the account code using the New Government Accounting System (NGAS).

Column (3) shall refer to the estimated income/receipts and expenditures for the fiscal year being reported.

Column (4) shall refer to the actual income/receipts and expenditures for the fiscal year reported.

Column (5) shall refer to the variance between the estimated and actual income/receipts and expenditures for the fiscal year
reported (Col. 4 Col. 3).

Column (6) refers to the variance, expressed in percentage (Col. 5 / Col. 3).

Column (7) shall cover other relevant information/reasons for increase or decrease in actual vis--vis target receipts and
expenditures.

This report shall be submitted to the Department of Budget and Management thru the Local Budget Officer within 30 days
from the end of the fiscal year reported, copy furnished the Local Finance Committee.
211
7.0 LOCAL BUDGET PERFORMANCE EVALUATION FORMS



LBPE Form No.1


PHYSICAL PERFORMANCE EVALUATION FORM
As of the 1
st
Semester Ending _______


Office/Department: __________

MFO/
Activity
%
Weight
Target
Output
Actual
Output
Variance
% of
Accomplishment
Points
Weighted
Score
(1) (2) (3) (4) (5) = 3-4 (6) = 3/4 (7) (8)















Total 100%



















INSTRUCTIONS:

Column (1) refers to the MFO of the various P/P/As of the Office/Department.
Column (2) refers to the percentage (%) weight of each MFO.
Column (3) refers to the target output for the semester being reported.
Column (4) refers to the actual output for the semester reported.
Column (5) refers to the difference between Col. 4 and Col. 3 (Col. 4 Col.4).
Column (6) refers to the accomplishment expressed in percentage (Col. 4 / Col. 3)
Column (7) refers to the point score based on the physical accomplishment shown in Column (6)
using the scoring system.
Column (8) refers to the weighted score (Col. 2 x Col. 7).

This Report shall be submitted to the LCE by the LFC on or before September 30 of each year.
212



LBPE Form No. 2


FINANCIAL PERFORMANCE EVALUATION FORM
As of the 1
st
Semester Ending _______


Department/Office:__________________

MFO/
Activity
%
Weight
Allotment
Released
Actual
Obligations
Incurred
Variance
Absorptive
Capacity
Points
Weighted
Score
(1) (2) (3) (4) (5) = 4-3 (6) = 4/3 (7) (8)















TOTAL

























INSTRUCTIONS:

Column (1) refers to the MFO of the various P/P/As of the Department/Office.
Column (2) refers to the percentage (%) weight of each MFO.
Column (3) refers to the allotment released for the Department/Office for the semester being
reported.
Column (4) refers to the actual obligations incurred as reflected in the Registry of Allotment and
Obligation (RAO) for the semester being reported.

Column (5) refers to the difference between Columns 4 and 3 (Col. 3 Col. 4).
Column (6) refers to the financial accomplishment expressed in percentage (Col. 4 / Col. 3).
Column (7) refers to the point score based on the financial accomplishment shown in Column 6
using the scoring system.
Column (8) refers to the weighted score (Col. 2 x Col. 7).

This report shall be submitted to the LCE by the LFC on or before September 30 of each year.
213
8.0 ILLUSTRATIVE PRESENTATION:

Office/Department Performance Evaluation

Financial Accomplishment


LBPE Form No. 2

FINANCIAL PERFORMANCE EVALUATION FORM
As of the 1
st
Semester Ending June 30, 2008

Department/Office: OFFICE OF THE TREASURER
MFO/
Activity
%
Weight
Actual
Obligations
Incurred
Allotment
Released
Variance
% of
Accomplis
hment
Points
Weighted
Score
(1) (2) (3) (4) (5) (6) (7) (8)
Treasury
Services
100% 8,200,000 9,500,000 1,300,000 86.3% 4 4


Physical Accomplishment


LBPE Form No.1


PHYSICAL PERFORMANCE EVALUATION FORM
As of the 1
st
Semester Ending June 30, 2008


Department/Office: OFFICE OF THE TREASURER
MFO/
Activity
%
Weight
Actual
Output
Target Variance
% of
Accomplish
ment
Point
s
Weighted
Score
(1) (2) (3) (4) (5) (6) (7) (8)
Treasury
Services
100%
21,800,000 25,000,000 -3,200,000 87.2% 2 2


Office of the Treasurer Performance Rating:
Summary
Financial Accomplishment (30% x 4) 1.200
Physical Accomplishment (70% x 2) 1.400
--------
Total 2.600
=====
Adjectival Performance Rating Satisfactory

214

PART III: ALLOCATIONS TO LOCAL
GOVERNMENT UNITS (ALGU)







































The 1973 Constitution laid down the principle of local
autonomy based on self-reliance. The enactment of
the 1987 Constitution marked more resolute efforts
towards the attainment of the nations dream of
genuine and meaningful local autonomy.

Section 2, Article X of the 1987 Constitution
provides, The territorial and political subdivisions
shall enjoy local autonomy.

This Constitutional mandate is given flesh by R.A.
No. 7160, otherwise known as the 1991 Local
Government Code, which provides for the
establishment of more responsive and accountable
government structure instituted through a system of
decentralization.

Effective sharing of political and administrative
powers between the national and local governments,
on the other hand, is anchored, in part, on the
equitable diffusion of national internal revenues
among the different levels of government as well as
the sharing of proceeds from the development of
national wealth and from other special shares with the
inhabitants of a particular community by the way of
direct benefits.

This Part of the manual delves on the provisions of
law as well as on the procedures set forth by different
issuances by which Local Government Units (LGUs)
may effectively access the different allocations to
LGUs.

215


ALLOCATIONS TO LOCAL GOVERNMENT UNITS (ALGU)










1.0 Internal Revenue Allotment
1.1 Introduction
1.2 Distribution of Shares
1.3 Use of the Fund
1.4 Fund Release Procedures

2.0 Special Shares

2.1 Share in the Utilization and Development of National Wealth
2.1.1 Distribution of Shares
2.1.2 Documentary Requirements for the Release of Fund
2.1.3 Use of the Fund
2.1.4 Fund Release Procedures

2.2 Share in the Gross Income Taxes Paid by All Businesses
and Enterprises within the Ecozones
2.2.1 Computation of Shares
2.2.2 Distribution of Fund
2.2.3 Fund Release Procedures

2.3 Share in Value Added Tax
2.3.1 Computation of Shares
2.3.2 Fund Release Procedures

2.4 Tobacco Excise Tax
2.4.1 Computation of Shares
2.4.2 Distribution of Shares
2.4.3 Use of the Fund
2.4.4 Fund Release Procedures
216
Legal Basis

The Internal Revenue Allotment (IRA) refers to the shares of LGUs
from the national internal revenue taxes (NIRT) equivalent to 40% of
the total annual revenue collection of the 3
rd
year preceding the current
fiscal year (Section 284, R.A. No. 7160, Article 378 [c], IRR of R.A.
No. 7160).

National internal revenue taxes include the following:

Income tax
Estate tax and donors tax
Value-added tax
Other percentage taxes
Taxes imposed by special laws, such as travel tax.


1.0 Internal Revenue Allotment (IRA)

1.1 Introduction

The allocation of the share of each LGU shall be released directly,
without need of any further action, to the provincial, city, municipal or
barangay treasurer, as the case may be. The IRA shall not be subject to
any lien or holdback that may be imposed by the national government for
whatever purpose (Section 286, R.A. No. 7160, Article No. 383 [c], IRR
of R.A. No. 7160).

Beginning FY 2007, the IRA is not only automatically released but
treated as an automatic appropriation (Section 4, R.A. No. 9358, FY 2006
Supplemental Appropriations). This means that the IRA need not pass
through congressional approval before it is released to LGUs. This
provision of the law makes the release of IRA shares more predictable
and allows LGUs to plan/program the use of their IRA fund more
effectively.


















1.2 Distribution of Shares

Section 285 of the Local Government Code (LGC) as implemented by
Article 382 (a), IRR of R.A. No. 7160, provides the codal formula or
the manner of allocation of the IRA share prescribed by Code for the four
levels of LGUs as follows:
217

50%
25%
Population
Land Area
Equal Sharing
25%

Provinces - Twenty-three percent (23%)
Cities - Twenty-three percent (23%)
Municipalities - Thirty-four percent (34%)
Barangays - Twenty percent (20%)












Figure 14. IRA share per LGU level

Illustrative examples showing the shares of provinces, cities
and municipalities using the codal formula:

The share of each province, city and municipality is computed
based on the following factors:

Population - Fifty percent (50%)
Land Area - Twenty-five percent (25%)
Equal Share - Twenty-five percent (25%)












Figure 15. Computation of IRA based on Indicative Factors

The IRA share based on population is computed using the
population data from a census of population conducted by the
Provinces
Cities

Municipalities
20%
23%
34% 23%
Barangays
218
National Statistics Office (NSO) every 10 years as contained in a
Presidential Proclamation Order.

The IRA share based on land area is computed using the
consolidated masterlist of land area prepared by the Land
Management Bureau (LMB) of the Department of Environment
and Natural Resources (DENR) every three (3) years.

The allocation of the individual share in the case of barangays,
shall be P80,000 for each barangay with a population of not less
than 100 inhabitants. The balance to be distributed shall be based
on population (60%) and equal sharing (40%).


1.3 Use of the Fund

Pursuant to Section 17 of R.A. No. 7160, the fund shall be used
to provide for basic services and facilities, particularly those
which have been devolved by the National Government.

Section 287, R.A. No. 7160, and Article 383 (b), IRR of R.A.
No. 7160 direct LGUs to set aside no less than 20% of their IRA
to fund development projects as identified in the LGUs
development plans.

The DBM-DILG Joint Circular No. 1, Series of 2005, prescribes
the specific use of the 20% Development Fund for the following
development projects:


1.3.1 Social Development

Establishment or rehabilitation of Productivity
Enhancement Center for out-of-school youths,
women, minors, displaced families, indigenous
people, differently-abled persons, and elderly persons

Establishment or rehabilitation of Manpower
Development Center

Construction or rehabilitation of health centers, rural
health unit or hospital, and purchase of medical
equipment

219

Construction or rehabilitation of a local government-
owned potable water supply system

Installation of street lighting system

Preservation of cultural/historical sites

Other programs or projects of similar nature


1.3.2 Economic Development

Implementation of a livelihood/entrepreneurship
development program or project

Construction/rehabilitation of a communal irrigation
of water impounding system and purchase of post-
harvest facilities such as farm or hand tractor with
trailer, thresher, mechanical drier, and the like

Construction/rehabilitation of farm-to-market roads

Construction/rehabilitation of local roads or bridges

Other programs or projects of similar nature.


1.3.3 Environmental Management

Construction/rehabilitation of sanitary landfill or
controlled dumpsite and purchase of a garbage truck
or related equipment

Community reforestation or urban greening projects

Flood control programs or projects such as de-
clogging of canals or de-silting of rivers

Other environmental management programs or
projects that promote air and water quality, as well as
productivity of coastal or freshwater habitat,
agricultural land, and forest land
220
1.4 Fund Release Procedures

The release of LGU share from the IRA follows these procedures:




















Figure 16. Fund Release Procedures of LGU share from the IRA


















The BIR, as collecting agency submits to DBM a
certification of the LGU share from NIRT equivalent to
40% of the total annual revenue collection of the 3rd
year preceding the current fiscal year as reconciled with
the BTr.
The DBM-CO computes the LGU shares, programs the
release of the fund;

The DBM-RO prepares necessary release documents to
effect the crediting of the share to the LGU accounts
maintained at authorized Government Servicing Banks
(GSBs).
221

2.0 Special Shares

2.1 Share in the Utilization and Development of National Wealth











There are four (4) types of national wealth with the responsible
collecting agency indicated:

Particulars Collecting Agency
Forest Charges
Department of Environment and
Natural Resources
Royalties and Mineral
Reservation
Mines and Geo-Sciences Bureau
Energy Production
Resources
Department of Energy
Mining Taxes Bureau of Internal Revenue

LGUs shall also have a share from proceeds derived by any
government agency or government-owned or controlled
corporation engaged in the utilization and development of the
national wealth based on the following formula whichever will
produce a higher share for the LGU:
.
One percent (1%) of the gross sales or receipts of the preceding
calendar year; or

Forty percent (40%) of the mining taxes, royalties, forestry,
energy resources production, and such other taxes, fees and
charges, including interests and fines the government agency or
government-owned or controlled corporation would have paid if
it were not otherwise exempt (Section 291, R.A. No. 7160;
Article 388, IRR of R.A. No. 7160).
Legal Basis

In addition to the internal revenue allotment, LGUs are also
entitled to 40% of the gross collection by the national
government from the preceding fiscal year out of the proceeds
derived from the utilization and development of national
wealth within the LGUs respective areas (Section 289 and
290, R.A. No. 7160 and Articles 386 and 387, IRR of R.A.
No.7160).

222
45%
20%
35%
Barangay
Province
Component City or
Municipality

65%
35%
Barangay
City

2.1.1 Distribution of Shares
Pursuant to Section 292 of R.A. No. 7160 and Article 389,
IRR of R.A. No. 7160, the distribution of LGU shares from
national wealth shall be as follows:

Where the natural resources are located in the province,
the province will have a share of 20%, the component
city/municipality, 45%; and the barangay, 35%.













Figure 17. Distribution of Shares from National Wealth
(where the natural resources are located in the province)


Where the natural resources are located in, a highly
urbanized or independent component city, the city will
have a share of 65%, and the barangay, 35%.












Figure 18. Distribution of Shares from National Wealth
(where the natural resources are located in a highly urbanized
or independent component city)
223

However, where natural resources are located in two (2) or
more cities, the allocation of shares shall be computed on the
basis of population (70%) and land area (30%).


2.1.2 Documentary Requirements for the Release of Fund

During budget execution, the DBM shall release the share of
LGUs upon submission to the Department by the collecting
agency of the following:

a. Certification showing the corresponding share of each
province, city, municipality, and barangay where the
national wealth is being developed and/or utilized; and

b. Certificate of Actual Remittance for the preceding year
from the Bureau of the Treasury (BTr).


2.1.3 Use of the Fund

LGU share from proceeds of national wealth shall be used to
finance local development and livelihood projects of the
recipient LGU.

In the case of proceeds derived from the development and
utilization of hydrothermal, geothermal and other sources of
energy, 80% of the proceeds shall be applied solely to lower
the cost of electricity in the LGU where such source of
energy is located. (Section 294, R.A. No. 7160; Article 391,
IRR of R.A. No. 7160)

In the case of any government agency or government-owned
or controlled corporations engaged in the utilization and
development of the national wealth, such share shall be
directly remitted by the government agency/government-
owned or controlled corporation concerned to the
provincial, city, municipal, or barangay treasurer within five
(5) days after the end of each quarter. (Section 293, R.A. No.
7160; Article 390 [b], IRR of R.A. No. 7160)


224

2.1.4 Fund Release Procedures

The DBM-DOF-DOE Joint Circular No. 2006-1 prescribes
the guidelines and procedures for the release of LGU shares
in the proceeds from the utilization and development of
national wealth, summarized hereunder:


Forest Charges, Royalties from Mineral Reservation,
and Mining Taxes

























Figure 19. Fund Release Procedures of LGU Shares
in the proceeds from Forest Charges, Royalties
from Mineral Reservation, and Mining Taxes

The Bureau of Internal Revenue (BIR), the Department of
Environment and Natural Resources (DENR), and the
Mines and Geosciences Bureau (MGB) submit to DBM-
Central Office a certification of the projected total shares
of LGUs based on the immediately preceding years
collections as basis for provision of appropriations cover
during budget preparation (on or before March 15).
DBM-CO programs the release of the fund.

DBM-ROs check source documents and release
necessary documents to effect the crediting of the share to
the LGU accounts maintained at authorized Government
Servicing Banks (GSBs).


The BTr submits to DBM-CO a certification on actual
remittances from the immediately preceding years
collections as basis by DBM in fund release during budget
execution.
225

Energy Resources Production



























Figure 20. Fund Release Procedures of LGU Shares
in the proceeds from Energy Resources Production








The Department of Energy (DOE) submits to DBM-CO
on or before March 15 the certification and all the
supporting documents relative to the collections made in
the immediately preceding year and the shares of the
LGUs concerned as basis for providing appropriations
cover.

DBM-CO evaluates/recommends and programs the
release of the fund.

DBM-ROs prepare the necessary release documents to
effect the crediting of the share to the LGU accounts
maintained at authorized GSBs.



LGUs receive their share.
Government servicing banks automatically credit amount
to respective MDS account maintained by the LGUs

226

2.2 Share in the Gross Income Taxes Paid by All Businesses and
Enterprises within the Ecozones












2.2.1 Computation of Shares

The two percent (2%) of the five percent (5%) final tax on
gross income earned or 40% of the total tax collection shall
be proportionately divided as follows:

1% of the 5% final tax or 20% of the total tax collected,
to the LGUs affected by the declaration of the Ecozones;
and

1% of the 5% final tax or 20% of the total tax collected,
to the Special Development Fund (SDF) of each LGU
outside but contiguous to the base/Ecozone areas.


2.2.2 Distribution of Fund

The 1 % share of LGUs concerned and the 1% SDF shall be
distributed based on the following factors and data source
consistent with the DBM formula for allocating the IRA:

Population 50%
Land Area 25%
Equal Sharing 25%
100%



Legal Basis

Local government units within Subic, Clark, John Hay, Poro
Point Special Economic and Free Port Zones are entitled to a 2%
share from gross income earned by all businesses within the
Ecozone area (R.A. No. 7227). The implementing guidelines and
procedures for the release of LGU share from ecozones are
provided under DBM-DILG-DOF Joint Circular No. 99-2.


227


2.2.3 Fund Release Procedures

In accordance with DBM-DILG-DOF Joint Circular No. 99-
2, the following procedures are applied in releasing LGU
shares from Ecozone:
























Figure 21. Fund Release Procedures of LGU Shares
from Ecozone









The DILG submits to BIR, copy furnished the DBM, the
list of LGUs entitled to receive share from Ecozone,
categorized into: those that are directly affected by the
declaration of the Ecozones (1%) and LGUs outside the
Ecozones but contiguous to it (1%).

On or before May 15, the BIR submits to DBM as basis
for appropriations cover the certified computed total
LGU share based on the revenue collections for two (2)
years immediately preceding the current year.

The DBM-CO programs the release of the fund.

DBM-ROs validate supporting documents to effect the
crediting of the share to the LGU accounts maintained at
authorized Government Servicing Banks (GSBs).


228
Legal Basis

Value-Added Tax (VAT) is the internal revenue tax imposed
under Section Nos. 106 and 108 of the NIRC of 1997 (formerly
Sections 100, 101 and 102 of the NIRC of 1977). In addition to
its IRA shares, RA No. 7643 allows Local Government Units
(LGUs) to share from VAT revenues equivalent to 50% of the
excess in VAT collection from the immediately preceding year,
to be distributed as follows:

20% to the city/municipality
80% to the national government

DBM-DOF-DILG Joint Circular No. 1-02 dated February 6,
2002 prescribes the guidelines and procedures on the release of
the 20% of the 50% share of LGUs in the incremental collection
VAT.

2.3 Share in Value Added Tax




















2.3.1 Computation of Shares

LGUs are entitled to a share in VAT only when there is an
incremental collection from Value-Added Tax which refers to the
excess in the annual increase in actual collection of VAT in the
immediately preceding year over the annual increase in the second
preceding year, illustrated as follows:















Year VAT Collection Increase
2006 P 64.55 M P 20.972M
2005 43.383M 19.700M
2004 23.886M -
2006 increase in collection P 20.972 M
Less: 2005 increase in collection 19.700 M
------------
Excess of increase in collection P 1.272 M
50% share in incremental collection P 0.636 M
Distributed as follows:

20% share of LGUs (city/municipality) P 0.127 M
80% share of national government
P
0.509 M
0.636 M
229

Formula for the Distribution of LGUs share
in the Incremental Collection from VAT







































Figure 22. Formula for the Computation of LGUs VAT Shares

If VAT is paid by
manufacturers, producers
without branch or
sales/outlet/s

If VAT is paid by
manufacturers, producers with
factories, project offices,
plantations and plants

100% to the city or
municipality where the
business is located

30% to the city or
municipality where the
principal office is located

If VAT is paid by
manufacturers, producers,
exporters where the
plantation is located at a
place other than the place
where the factory is located

If VAT is paid by the
manufacturers, producers,
exporters and has two (2) or
more factories, plants and
plantations

30% to the
city/municipality
where the principal
office is located

70% to the city or
municipality where the
factory, project offices,
plant or plantation is
located

30% to the
city/municipality
where the principal
office is located

42% to the
city/municipality where
the factory is located

28% to the
city/municipality where
the plantation is located

70% shall be prorated
among the localities
where the factories,
project offices, plants
and plantations are
located

230

Based on the foregoing formula, the BIR prepares a certification of
the computed LGU share from VAT tax payments/collections and
submits to DBM.


2.3.2 Fund Release Procedures















Figure 23. Fund Release Procedures of LGU Share
from VAT tax payments/collections















The BIR submits to DBM on or before May 15 a certification
of the total computed LGU share based on the revenue
collections corresponding to 20% of the 50% of the
incremental collection from VAT collections.

The DBM-CO programs the release of the fund.

DBM-ROs validate supporting documents to effect the
crediting of the share to the LGU accounts maintained at
authorized Government Servicing Banks (GSBs).


231
30%
Municipalities and Cities
within the district as
identified by their
respective
legislators

50%
divided
according to
volume
40%
Municipalities

30%
Province

50%
divided equally
2.4. Tobacco Excise Tax









2.4.1 Computation of Shares

Pursuant to Memorandum Circular No. 61-A issued by the
Office of the President, the shares of LGUs from the tobacco
excise tax fund shall be computed based on the following:

a. BIR Certification of the 15% excise tax collection on
locally manufactured Virginia type cigarettes for the
second calendar year preceding the year of distribution to
serve as basis for appropriation cover

b. National Tobacco Administration (NTA) Certification of
the total volume of tobacco production/acceptances for
the immediate past year to serve as basis for the
computation of the actual shares of LGUs

2.4.2 Distribution of Shares

OP MC No. 61-A provides for the distribution of the shares
of the respective beneficiary LGUs, as follows:











Figure 24. Distribution of
Shares of LGUs from the
tobacco excise tax
Legal Basis

By virtue of R.A. No. 7171 dated January 9, 1992 entitled An
Act to Promote the Development of Farmers in the Virginia
Tobacco Producing Provinces, tobacco-producing LGUs are
entitled to 15% of excise taxes on locally-manufactured
Virginia-type cigarettes.

232
2.4.3 Use of the Fund

The shares of LGUs from the Tobacco Excise Tax shall be
used for the following projects/purposes:

a. Cooperative projects that will enhance better quality of
products, guarantee the market and, as a whole, increase
farmers income;

b. Livelihood projects, i.e. alternative farming system to
enhance farmers income;

c. Agro-industrial programs that will enable farmers to be
involved in the management and subsequent ownership
of these projects, i.e., post-harvest facilities and
secondary processing like cigarette manufacturing and
by-product utilization; and

d. Infrastructure projects such as farm-to-market roads.

2.4.4 Fund Release Procedures

















Figure 25. Fund Release Procedures of LGU Shares
from Tobacco Excise Tax

The NTA submits certification on the total volume of
tobacco production/acceptances for the immediate past year
as reference in the computation of individual shares of
LGUs.
The DBM-CO computes the share of LGUs and programs
the release of the fund.
DBM ROs prepare necessary release documents to effect
the crediting of the share to the LGU accounts maintained at
authorized Government Servicing Banks (GSBs).

The BIR submits to DBM on or before April 15 the
estimated collection and the shares of the LGUs from
tobacco excise tax for purposes of providing appropriations
cover.
233
This last part of the Manual is an added
feature that provides clarifications and
opinions of the DBM on contentious issues
on local government budgeting. Unless
modified or revised, the answers to the
issues shall form part of the policy
guidelines of the DBM as an oversight
agency pursuant to Section 354 of R.A. No.
7160.

PART IV. FREQUENTLY-ASKED QUESTIONS
O ON N L LO OC CA AL L GOVERNMENT
BUDGETING




































234


Frequently-Asked Questions on Local Government Budgeting


A. Budget Preparation
B. Budget Authorization
C. Budget Review
D. Items of Appropriations Included, by Attribution,
in the General Fund Annual Budget
E. Intelligence and/or Confidential Expenses
F. Special Education Fund
G. Calamity Fund
H. Allocation to Local Government Units
I. Aid to Barangays
J. Premium Subsidy for Indigents under the National Health
Insurance Program
K. Gender and Development (GAD)
L. Senior Citizens and the Differently-Abled
M Personal Services Limitation
N. Creation of Positions
O. Local Government Economic Enterprises
and Public Utilities












235
A. Budget Preparation,

1. Can the LGU appropriate for Monetization of Leave Credits?

Generally, Monetization of Leave Credits is chargeable against
savings. However, under CSC-DBM Joint Circular No. 2, s. 2003,
Monetization of Leave Credits, CNA Incentive Bonus, Overtime Pay,
and such other benefits that are authorized by law but are chargeable
against savings of the LGUs may also be included by direct
appropriation either in the annual budget or supplemental budget of
the LGU concerned, provided these are within the PS Limitation as
stipulated under Section 325 (a) of R.A. No. 7160.


2. Can appropriation for development projects of no less than
twenty percent (20%) of the IRA be appropriated in lump-sum
amount?

No. The said 20% appropriation should cover itemized projects.
Section 287 of R.A. No. 7160 provides that each LGU shall
appropriate in its annual budget no less than 20% of its annual IRA for
development projects. Article 384 of its IRR provides further that the
local development projects to be funded are those embodied or
contained in the local development plans.

Article 410 further provides that the LDCs shall submit to the local
finance committee a copy of the local development plan and annual
investment program prepared and approved during the fiscal year
before the calendar for budget preparation in accordance with
applicable laws, specifying therein projects proposed for inclusion in
the local government budget. x x x. The local finance committee
shall use the plan to ensure that projects proposed for local funding are
included in the budget.


3. Is an Appropriation Ordinance necessary to authorize utilization
of loan proceeds?

Yes. Loans, interests, bond issues, and other contributions for specific
purposes are considered as special accounts in the general fund
(Section 313, R.A. No. 7160). A special account in the general fund
requires an Appropriation Ordinance for its utilization.

236

4. Is an Appropriation Ordinance necessary to authorize the use of
the shares in the proceeds from the development and utilization of
the national wealth?

Yes. Article 391 of the IRR of R.A. No. 7160 provides that the
proceeds from the shares of LGUs in the proceeds from the
development and utilization of the national wealth shall be
appropriated by their respective Sanggunian to finance local
development and livelihood projects.

Article 454 (d) of the same IRR reiterates this mandate and provides
further that disbursements from such special accounts under the
General Fund shall proceed from itemized appropriations in the
budgets of LGU instead of by lump sum.

Such itemized appropriations shall be for specific development
projects/activities embodied in the local development plan and/or
public investment program formulated and prioritized by the LDC and
approved by the Sanggunian concerned.



B. Budget Authorization

1. Are the voting and procedural requirements of the ordinance
authorizing the use of savings and augmentation under Section
336 of R.A. No. 7160 the same as those for the ordinance
authorizing the use of savings as a fund source for a supplemental
budget under Article 417 of R.A. No. 7160, as amended by A.O.
No. 47 dated 12 April 1993 (implementing Section 321 of R.A. No.
7160)?

As to voting requirement - The affirmative vote of a majority of all the
Sanggunian members is required to pass an Appropriation Ordinance,
whether for annual or supplemental budgets, under Article 107 (g) of
the IRR of R.A. No. 7160. Relatedly, the use of savings and
augmentation within the same expense class falls under the category
of Use of Appropriated Funds and Savings under Section 336 of the
same law. Hence, if the Appropriation Ordinance requires absolute
majority in its passage, it follows that any modification in said
appropriation will have to comply with the same requirement.

237
As to procedural requirement A supplemental budget is not required
in passing an ordinance authorizing the use of savings and
augmentation within the same expense class under Section 336 of
R.A. No. 7160 since the law merely requires the authority by
ordinance.

Considering the foregoing, while the ordinance under Section 336 and
an Appropriation Ordinance have the same voting requirements, each
has a different procedural requirement. Further, the ordinance under
Section 336 may have a regular format simply stating that the LCE
and/or the Presiding Officer of the Sanggunian is authorized to
augment any item in the approved annual budget for their respective
offices from savings in other items within the same expense class of
their respective appropriations, as opposed to the use of savings
considered as funds actually available to be covered by a supplemental
budget as provided under Article 417 of R.A. No. 7160, as amended
by A.O. No. 47 (implementing Section 321 of R.A. No. 7160).

Nevertheless, it is suggested that, for convenience, should the
Sanggunian decide to grant the LCE and/or the Presiding Officer of
the Sanggunian with the authority to use savings and augment within
the same expense class in their respective appropriations, the said
authorization may be included as a general provision/section in the
ordinance authorizing the annual appropriations.


2. What is the difference between the use of savings as a fund source
for a supplemental budget under Article 417 of the IRR of R.A.
No. 7160 as amended by A.O. No. 47 (implementing Section 321 of
R.A. No. 7160) and the use of savings for augmentation under
Section 336 of R.A. No. 7160?

The use of savings under Article 417 of the IRR as amended by A.O.
No. 47, implementing Section 321 of R.A. No. 7160, will require the
enactment of an ordinance authorizing supplemental appropriations
(supplemental budget).

Under A.O. No. 47, an ordinance providing for a supplemental budget
may be enacted when supported by funds actually available as
certified by the local treasurer. Said A.O. further provides that funds
are likewise deemed actually available when there are savings.

238
In this case, the usual process of authorizing a supplemental budget
will always apply. The supplemental budget will involve the
reversion of the savings and its corresponding re-appropriation to any
item of expenditure under any expense class. Accordingly, the
Appropriation Ordinance shall be subject to review by the Department
of Budget and Management or the Sangguniang Panlalawigan as the
case maybe (Section 326 and 327, R.A. No. 7160).

On the other hand, the use of savings for augmentation under Section
336 will require the enactment of an ordinance, without the necessity
of a supplemental budget submitted by the LCE. The ordinance will
give the omnibus authority to the LCE or the Presiding Officer of the
Sanggunian to augment any item in the approved annual budget for
their respective offices from savings in other items within the same
expense class of their respective appropriations.


3. Does the proposed ordinance covering the grant of authority to
the LCE and/or the Presiding Officer of the Sanggunian to use
savings and augment within the same expense class in their
respective appropriations under Section 336 of R.A. No. 7160 need
to emanate from the LCE like that of a supplemental budget?

No. The proposed ordinance granting the authority to use savings
under Section 336 of R.A. No. 7160 need not emanate from the LCE
unlike that of a supplemental budget.

A supplemental budget reflects changes in the annual budget under the
conditions provided in Section 321 of R.A. No. 7160 and Article 417
of its IRR as amended by A.O. No. 47. Accordingly, since the annual
budget emanates from the LCE as provided under Section 318 of R.A.
No. 7160, the supplemental budget should likewise emanate from the
LCE.

On the other hand, the proposed ordinance granting authority to use
savings under Section 336 is not a budget and need not emanate from
the LCE.






239
4. How may the use of savings and augmentation under Section 336
and the use of the savings as funds actually available for
supplemental budget under Article 417 of R.A. No. 7160, as
amended by A.O. No. 47 (implementing Section 321 of R.A. No.
7160) be distinguished?

The following matrix summarizes the distinctions between the use of
savings under Sections 336 and 321 as aforementioned:


Requirement

Section 336 Section 321

What is the instrument
required for authority?


Ordinance

Appropriation Ordinance
covering a supplemental
budget

Is there a need for a
supplemental budget?


No need for a
supplemental budget

Supplemental budget
needed

What is the purpose of
the savings?


For augmentation of
existing item/s of
expenditure within the
same expense class


For re-appropriation
may be to a different
expense class

Where should the
proposal emanate?


From the LCE or the
Sanggunian

From the LCE only
For provinces or highly-
urbanized cities, will the
ordinance be subject to
review by DBM?
No Yes


5. Can the LGU pass an ordinance authorizing use of savings and
augmentation under Section 336 of R.A. No. 7160 when operating
under a reenacted budget?

No. Use of savings and augmentation under Section 336 of R.A. No.
7160 is possible only when there is an approved annual budget for
the current year. A reenacted budget does not qualify as an approved
annual budget for the current year.


240
6. Can the Sanggunian increase items of appropriation in the
executive budget?

Yes, provided that the aggregate increase does not cause an excess
over the total proposed amount in the executive budget pursuant to
Article 415 (a) of the IRR of R.A. No. 7160.


7. Can the Sanggunian introduce/include new items in the executive
budget?

Yes, but only to provide for statutory and contractual obligations and
it does not cause an excess over the total proposed amount in the
executive budget pursuant to Article 415 (a) of the IRR of R.A. No.
7160.

As reference to questions 6 and 7 hereof, the doctrine enunciated in
the case of Sarmiento, et al. vs. The Treasurer of the Philippines, et al.
(GR Nos. 125680 and 126313, September 04, 2001) may be applied
where the Supreme Court ruled that under Section 25 (1), Article VI
of the 1987 Constitution, Congress is enjoined from increasing the
total budget for the operation of the Government as recommended by
the President, not the individual items of appropriations. Records of
the 1986 Constitutional Commission reveal that the purpose of the
provision is to avoid the possibility of a big budget deficit if Congress
were given an unbridled hand in passing upon the appropriations
recommended by the President as specified in the budget. The
constitutional prohibition against such increase is an assurance that the
expected income of the government will be sufficient for the
operational expenses of its different agencies and projects specified in
the appropriations law.

It may be noted that the subject provision of R.A. No. 7160
prohibiting the increase in the proposed amount in the executive
budget is similar to the provision in Executive Order No. 292 (the
Administrative Code of 1987), particularly Section 24, Chapter 4 on
Budget Authorization, Book VI, in the case of national government
budgeting, to wit:

SEC. 24. Prohibition Against the Increase of
Appropriation. The Congress shall in no case increase
the appropriation of any project or program of any
department, bureau, agency or office of the Government
241
over the amount submitted by the President in his
budget proposal. In case of any reduction in the
proposed appropriation for a project or program, a
corresponding reduction shall be made in the total
appropriation of the department, office or agency
concerned and in the total of the General Appropriations
Bill.


8. Can the Sanggunian pass an Appropriation Ordinance covering a
supplemental budget for the current fiscal year after December
31?

No. The Sanggunian cannot pass an Appropriation Ordinance
covering a supplemental budget for the current fiscal year after
December 31.

Supplemental budgets cover changes in the annual budget, thus, they
should be authorized within the fiscal year covered by the annual
budget. Article 455 of the IRR of R.A. No. 7160 provides that the
official fiscal year of LGUs shall be the period beginning with the first
(1
st
) day of January and ending with the thirty-first (31
st
) day of
December of the same year.

Further, the reversion of funds under Section 322 of R.A. No. 7160 is
at the end of the fiscal year (except in cases of continuing
appropriations when the capital outlay projects are not yet completed).


9. Section 320 of R.A. No. 7160 provides that The ordinance
enacting the annual budget shall take effect at the beginning of the
ensuing calendar year. An ordinance enacting a supplemental
budget, however, shall take effect upon its approval or on the date
fixed therein. What about the requirement of publication under
Section 59 of R.A. No. 7160 and Article 113 of its IRR?

Posting and/or publication, as the case may be, of an ordinance is
required under Section 59 of R.A. No. 7160. The mandatory word
shall was used by the law without any qualification or exemption, as
follows:

(a) Unless otherwise stated in the ordinance or
resolution approving the local development plan and
242
public investment program, the same shall take effect
after ten (10) days from the date a copy thereof is
posted in a bulletin board at the entrance of the
provincial capitol or city, municipal, or barangay
hall, as the case may be, and in at least two (2) other
conspicuous places in the local government unit
concerned.

(d) In the case of highly urbanized and independent
component cities, the main features of the ordinance
or resolution duly enacted or adopted shall, in
addition to being posted, be published once in a local
newspaper of general circulation within the city,
provided, that in the absence thereof, the ordinance or
resolution shall be published in any newspaper of
general circulation.


10. What is the effect if the Appropriation Ordinance is not posted or
published? Is posting/publication a requirement for the effectivity
of the Appropriation Ordinance?

If the Appropriation Ordinance is not posted and/or published, as the
case may be, its validity may be questioned. However, laws,
ordinances and other issuances enjoy the presumption of regularity
and validity until invalidated by the court.


11. In the exercise of the veto power, the reenacted figure results in a
situation where the expenditure is greater than the estimated
income. What figure or procedure should the LGU adopt?

By analogy, the rule under Section 323 of R.A. No. 7160 may be
applied. The reenacted figure should not exceed the estimated income
since the basic rule is that the aggregate amount appropriated shall not
exceed the estimates of income (Section 324 [a], R.A. No. 7160).






243
12. One of the functions of the Secretary to the Sanggunian is to keep
the seal of the LGU and affix the same with his signature to all
ordinances, resolutions, and other official acts of the Sanggunian.
What is the effect on the ordinance if the Secretary to the
Sanggunian does not sign the ordinance?

The law provides that the Secretary to the Sanggunian shall affix his
signature to all ordinances and present the same to the Presiding
Officer for his signature (Section 469 [c (2)], R.A. No. 7160; Article
122 [a (3) (ii)], IRR of R.A. No. 7160).

The requirement is mandatory. Accordingly, the Secretary to the
Sanggunian cannot refuse to sign the Appropriation Ordinance.
Otherwise, he/she may be liable under applicable laws.

Nevertheless, in case the Secretary to the Sanggunian refuses to sign,
such refusal will not affect the validity of the Appropriation Ordinance
duly passed by the Sanggunian. Otherwise, that would be tantamount
to giving the Secretary to the Sanggunian the veto power or the
control in deciding whether the Appropriation Ordinance will be valid
or not, and if it will be submitted for the consideration of the LCE.


13. One of the functions of the Secretary to the Sanggunian is to keep
the seal of the LGU and affix the same with his signature to all
ordinances, resolutions, and other official acts of the Sanggunian
and present the same to the Presiding Officer for his signature.
What if the Presiding Officer does not sign the ordinance? What is
the effect on the ordinance?

There is no specific provision directly mandating the regular Presiding
Officer of the Sanggunian to sign the ordinance, etc. Nevertheless, the
following provisions of R.A. No. 7160 are clear:

The Secretary to the Sanggunian shall affix his signature to all
ordinances and present the same to the Presiding Officer for his
signature (Section 469 [c (2)], R.A. No. 7160; Article 122 [a (3)
(ii)], IRR of R.A. No. 7160).

The Secretary to the Sanggunian shall forward to the LCE for
approval, copies of ordinances enacted by the Sanggunian and duly
certified by the Presiding Officer (Section 469 [c (3)], R.A. No.
7160; Article 122 [a (3) (iii)], IRR of R.A. No. 7160).
244

Further, Section 49 provides that the temporary Presiding Officer
shall certify within 10 days from the passage of the ordinance.

Consequently, if the Presiding Officer refuses to sign, the Secretary to
the Sanggunian may certify to the fact of the Presiding Officers
refusal to sign.

Such refusal, however, will not affect the validity of the Appropriation
Ordinance duly passed by the Sanggunian since the Presiding Officer
has no veto power.


14. Can the Sanggunian withdraw the proposed Appropriation
Ordinance which was already submitted to the LCE for approval?

There appears to be no legal provision in such a case. However, it
may be assumed that the withdrawal of the proposed Appropriation
Ordinance may not be allowed since the legislation process at such
point has already been completed. Thus, the executive consideration
of the proposed Appropriation Ordinance should take its course.


15. What amount may the LGUs appropriate in their
annual/supplemental budgets (ABs/SBs) covering proceeds from
loans? May the total amount of the loan as approved (but actually
to be released in tranches) considered as funds actually
available or only those amounts that are released to and actually
received by the LGU?

The total amount of the approved loan even if it would be received in
tranches may be the subject of appropriations under the AB or SB.

Section 316 (b) of R.A. No. 7160 provides that the LFC shall
recommend the appropriate tax and other revenue measures or
borrowing which may be appropriate to support the budget.

Further, SB may be enacted when it is supported by new revenue
sources pursuant to Section 321 of R.A. No. 7160. It may be gleaned
from Article 417 of the IRR of the same law as amended by A.O. No.
47 that approved loans may be considered as a new revenue source
when it has not been included in the estimate of income which served
245
as basis for the AB or not taken into account during the preparation
and enactment of the AB.

In the case of SBs, what amount will be certified as actually
available by the local treasurer and when is the fund considered
actually available?

For SB supported by funds actually available as certified by the local
treasurer, the amounts to be certified are only those actually collected
at any given point during the fiscal year, which is over and above the
estimated income collection for that point in the year. Further, funds
are likewise deemed actually available when there are savings as
defined under Article 417 of the IRR of R.A. No. 7160, as amended
by A.O. NO. 47.

Some LGUs contend that if the amount to be appropriated will be
based on the loan proceeds released to and actually received by
the LGU, then the LGU will have to conduct a separate
procurement for every loan proceeds received, in view of the
provisions of R.A. No. 9184 (The Government Procurement
Reform Act). They claim that this may not be practical especially
when the loan covers only one project in that it may result to one
project having several contractors.

A separate procurement for every loan proceeds released and actually
received is unnecessary. Under Section 5 of R.A. No. 9184, the
Approved Budget for the Contract is the budget for the contract
approved by the Sanggunian. In addition, to ensure that obligations to
be incurred will not exceed appropriations and to guarantee that they
will be backed up by cash, procurements should be made only after
allotments have been released for the purpose.


16. Whose signatures are required in the Appropriation Ordinance?
Will the Appropriation Ordinance need the signature of all the
members of the Sanggunian or only those who have voted in favor
of its passage?

The minimum signatures required in an Appropriation Ordinance are
those of the Secretary to the Sanggunian, the Presiding Officer, and
the LCE.

246
The Appropriation Ordinance may not need the signature of everyone
in the Sanggunian, as long as the ordinance was duly enacted.

The Internal Rules of Procedure of the Sanggunian may, however,
provide additional requirements for signatures in the Appropriation
Ordinance.


17. What are the disadvantages of a reenacted budget in case of
failure of the Sanggunian to enact the annual appropriations?

Only the annual appropriations for salaries and wages of existing
positions, statutory and contractual obligations, and essential operating
expenses authorized in the annual and supplemental budgets for the
preceding year shall be deemed reenacted and disbursement of funds
shall be in accordance therewith (Section 323, R.A. No. 7160; Article
415, IRR of R.A. No. 7160).

Accordingly, a reenacted budget will have implied disadvantages,
such as, but not limited to, the following:

No creation of positions
No new programs, projects and activities
No utilization of the increase in IRA allocation for the year
since the same is not covered by an Appropriation Ordinance
Non-implementation of non-recurring activities no matter how
vital they may be
No supplemental appropriations


18. Is the appropriation for development projects of no less than
twenty percent (20%) of the IRA included in the reenacted items?

No. Only the annual appropriations for salaries and wages of existing
positions, statutory and contractual obligations, and essential operating
expenses authorized in the annual and supplemental budgets for the
preceding year shall be deemed reenacted and disbursement of funds
shall be in accordance therewith (Section 323, R.A. No. 7160; Article
415, IRR of R.A. No. 7160).

Accordingly, there can be no implementation of new projects under a
reenacted budget.
247

C. Budget Review

1. Should an ordinance authorizing supplemental appropriations
(supplemental budget) submitted after the fiscal year be
reviewed?

Yes, provided the ordinance authorizing the supplemental
appropriations was enacted within the fiscal year covered by the
annual budget, inasmuch as supplemental budgets cover changes in
the annual budget as authorized under Section 321 of R.A. No. 7160,
as implemented by Article 417 of its IRR as amended by A.O. No. 47
dated 12 April 1993.


2. May the provision for lump-sum before its legal basis is issued,
like salary adjustments, be allowed in budget review?

If a legal basis exists during the review of the Appropriation
Ordinance, the provision for the lump-sum may be allowed.
Nevertheless, a condition that subsequent provisions should be made
only when there is an existing legal basis at the time of enactment of
the Appropriation Ordinance shall be imposed in the review action.
Otherwise, in the absence of a legal basis at the time of the budget
review, the lump-sum will be disallowed.


3. Can the LCE or Sanggunian withdraw an Appropriation
Ordinance already submitted to a reviewing body?

No. The enactment of the Appropriation Ordinance has already been
completed at the LGU level. Hence, the review process must take its
course.


4. Under what budget will an LGU operate after the local
Sanggunian overrode the veto of the Annual Budget (AB) by the
LCE Reenacted Budget or the AB the veto of which was
overrode by the Sanggunian?

From January 1 until the effectivity of the ordinance authorizing the
AB (as overridden), the ordinance authorizing the appropriations of
248
the preceding year (AB and SB) shall be deemed reenacted (Section
323, R.A. No. 7160).

Nevertheless, it is understood that in the implementation of the
reenacted budget, only the annual appropriations for salaries and
wages of existing positions, statutory and contractual obligations, and
essential operating expenses authorized in the annual and
supplemental budgets for the preceding year shall be deemed
reenacted and disbursement of funds shall be in accordance therewith
(Section 323, R.A. No. 7160).

An AB cannot be covered by two Appropriation Ordinances (AOs).
Passing the AB in several parts is not allowed due to the settled rule
on comprehensive budgeting mandated under R.A. No. 7160.

The AB required to be enacted is a financial plan embodying the
expenditures for one fiscal year (Section 306 [a], R.A. No. 7160).

The local government budget consists of estimates of income and
total appropriations covering the current operating expenditures
(COE) and capital outlays (CO) (Section 314 [a], R.A. No. 7160).

The AB shall be enacted through an ordinance (Section 319, R.A.
No. 7160).

All budgetary proposals shall be included in the budget preparation
process (Section 321, R.A. No. 7160). That is why, after the
submission of the executive budget, no ordinance providing for a
supplemental budget shall be enacted except when supported by
funds actually available as certified by the local treasurer; by new
revenue sources; or for budgetary realignment in times of public
calamity (Article 417, IRR of R.A. No. 7160).

Within the contemplation of R.A. No. 7160, the two AOs cannot be
considered as a single fiscal plan that embodies expenditures or total
appropriations for the COE and CO for one fiscal year. They cannot
be regarded as one or an ordinance by which an AB shall be
enacted.

(DBM Review Letter dated 30 June 2008 Re Annual Budget of the
Province of Iloilo)


249
5. What will be the review findings if new items are included by the
Sanggunian over those provided in the proposed executive
budget?

The Appropriation Ordinance shall be declared inoperative in part.

Under Article 415 of the IRR of R.A. No. 7160, the Sanggunian may
not increase the proposed amount in the executive budget nor include
new items except to provide for statutory and contractual obligations
but in no case shall it exceed the total appropriations in the executive
budget.

(DBM Review Letter dated 20 October 2008 Re Annual Budget of the
Mandaue City)


6. May the LCE be required to secure prior authority from the
Sanggunian before disbursing appropriated amounts?

No. The LCE may not be required to secure prior authority from the
Sanggunian before disbursing appropriated amounts. Section 320 of
R.A. No. 7160 vested in the LCE the responsibility for the execution
of and accountability for the Annual Budget. Further, Section 346 of
the same law mandated that disbursements shall be made in
accordance with the annual Appropriation Ordinance without the prior
approval of the Sanggunian.

(DBM Review Letter dated 20 October 2008 Re Annual Budget of the
Mandaue City)


7. May an LGU whose Annual Budget (AB) was declared
inoperative in its entirety pass a Supplemental Budget?

An LGU whose AB was declared inoperative in its entirety is
considered as having no AB, and is, therefore, operating on a
reenacted budget.

Under Section 323 of R.A. No. 7160 and Article 415 (a) of its IRR, no
ordinance authorizing supplemental appropriations shall be passed in
place of annual appropriations.

250
Relatedly, if the LGU wants to provide supplemental appropriations, it
should first enact a new AB that is in conformity with the review
findings and recommendations of the reviewing authority


D. Items of Appropriations Included, by Attribution, in the
General Fund Annual Budget

1. What are the items of appropriations that shall be included, by
attribution, in the General Fund Annual Budget?

The following items of appropriations shall be included, by
attribution, in the General Fund Annual Budget:

a. Gender and Development (GAD) Plan with its programs,
projects and activities (PPAs) that specify womens needs and
GAD concerns pursuant to R.A. No. 7192 (Women in
Development and Nation-Building Act), the Department of
Budget and Management (DBM), National Economic and
Development Authority (NEDA), and National Commission on
the Role of Filipino Women (NCRFW) Joint Circular (JC) No.
2004-1 issued in 2004 (superseding DBM-NEDA-NCRFW JC
No. 2001-1 dated August 15, 2001), and Department of the
Interior and Local Government (DILG)-DBM-NCRFW JC No.
2001-01 dated December 19, 2001;

b. Plans, PPAs and services that will address the needs of senior
citizens and differently-abled persons pursuant to the applicable
provisions in the annual General Appropriations Act (GAA) and
R.A. No. 7432 (An Act to Maximize the Contribution of Senior
Citizens to Nation Building, Grant Benefits and Special
Privileges and for Other Purposes), R.A. No. 7876 (An Act
Establishing a Senior Citizens Center in All Cities and
Municipalities of the Philippines, and Appropriating Funds
Therefor), and R.A. No. 7277 (Magna Carta for Disabled
Persons) as amended by R.A. No. 9442;

c. Facilities that will enhance the mobility, safety and welfare of
differently-abled persons pursuant to R.A. No. 7277 and Batas
Pambansa Blg. 344;

251
d. Community-based Human Immunodeficiency Virus/Acquired
Immune Deficiency Syndrome (HIV/AIDS) prevention and care
services pursuant to R.A. No. 8504 (Philippine AIDS
Prevention and Control Act of 1998);

e. Implementation of basic social services responsive to the
Millennium Development Goals (MDGs), such as:

Poverty reduction projects;
Nutrition services;
Basic education services;
Maternal and child health services;
Health services to combat HIV/AIDS, malaria and
other major diseases; and
Safe drinking water.

f. Implementation of the programs of the Local Councils for the
Protection of Children (LCPC) pursuant to R.A. No. 9344
(Juvenile Justice and Welfare Act of 2006). One percent (1%)
of the IRA of barangays, municipalities and cities shall be
allocated for the strengthening and implementation of the
programs of the LCPC: Provided, that the disbursement of the
fund shall be made by the LGU concerned.



E. Confidential/Intelligence Expenses

1. What are Confidential/Intelligence Expenses?

Confidential Expenses refer to expenses related to surveillance
activities in civilian department/agencies that are intended to support
the mandate/operations of the agency/LGU.

Intelligence Expenses refer to expenses related to intelligence
information gathering activities of uniformed personnel and
intelligence practitioners that have direct impact on national/local
security.




252
2. What are the legal bases for the allocation and use of funds for
confidential/intelligence expenses?

The general welfare clause under Section 16 of R.A. No. 7160 states,
among others, that, LGUs shall maintain peace and order, and
preserve the comfort and convenience of their inhabitants.

Accordingly, the DILG in its capacity and general supervisory
authority over LGUs as delegated by the President pursuant to
Administrative Order (A.O.) No. 267 series of 1992 issued
Memorandum Circular (MC) No. 99-65 dated April 23, 1999
providing policies and guidelines relative to the utilization of funds for
intelligence or confidential purposes. These guidelines were further
supplemented by DILG MC No. 99-100 dated June 15, 1999.

The Commission on Audit (COA) has strengthened the use of public
funds for intelligence and/or confidential purposes when it issued
COA Circular No. 92-385 dated October 1, 1992 and COA Circular
No. 2003-003 dated July 30, 2003 relative to the audit and liquidation
guidelines and documentary requirements for Intelligence and/or
Confidential Funds.


3. What are the guidelines in the allocation and use of public funds
for confidential/intelligence expenses?

The guidelines in the allocation and use of public funds for
intelligence and/or confidential purposes are prescribed under DILG
MC No. 99-65 as supplemented by DILG MC No. 99-100. The
following provisions thereof may be emphasized:

a. An allocation for peace and order concerns may be provided in the
annual budget of an LGU. Provided, that peace and order is a
priority investment area.

b. The total annual amount appropriated for intelligence or
confidential undertakings shall not exceed thirty percent (30%) of
the total annual amount allocated for peace and order efforts or
three percent (3%) of the total annual appropriations, whichever is
lower.



253
For example:

A. Total Allocation for Peace and Order P10M
Multiply by 30% 30%
Allocation for Intelligence/Confidential Fund P 3M
====

B. Total Appropriations (Annual Budget) P200M
Multiply by 3% 3%
Allocation for Intelligence/Confidential Fund P 6M
====

In this case, the computation yielding the lower amount (i.e., letter
A) shall be used as basis in the allocation for
intelligence/confidential purposes.

The funds appropriated for Intelligence and/or Confidential
activities shall be used purposely for the conduct of intelligence
and/or confidential operations and shall be limited to the following:

Purchase of information;
Payment of rewards;
Rental and other incidental expenses relative to the
maintenance of safehouses; and
Purchase of supplies and ammunitions, provision of
medical and food aid, as well as payment of incentives or
traveling expenses relative to the conduct of intelligence or
confidential operations.


F. Special Education Fund

1. What are the legal bases for the Special Education Fund (SEF)?

One of the special funds that shall be maintained in every provincial, city
or municipal treasury is the Special Education Fund (SEF). Section 309
(a) of R.A. No. 7160 provides that the SEF shall consist of the respective
shares of provinces, cities, municipalities and barangays in the proceeds
of the additional tax on real property to be appropriated for purposes
prescribed in Section 272 of this Code.

Section 272 also provides that proceeds from the additional one percent
(1%) tax on real property accruing to the SEF shall be automatically
254
released to the Local School Boards. In the case of provinces, the
proceeds shall be divided equally between the provincial and municipal
School Boards; provided that the proceeds shall be allocated for the
following as determined and approved by the Local School Board:

Operation and maintenance of public schools;
Construction and repair of school buildings;
Facilities and equipment;
Educational research;
Purchase of books and periodicals; and
Sports development.


2. What are the policy guidelines on the use of the SEF?

The implementing guidelines on the utilization of the SEF are clarified in
the Joint Circulars issued by the DECS (now, Department of Education
[DepEd]), the DBM and the DILG:

Prioritization of Expenses Charged
against the SEF

1. Operation and maintenance of public schools,
including organization of extension, non-formal,
remedial and summer classes, as well as payment
of existing allowances of teachers granted by
LGUs chargeable against the SEF as of 31
December 1997, provided that any additional
allowances that may be granted to teachers by
LGUs shall be charged to the general fund of
LGUs, subject to existing budgeting rules and
regulations;

2. Construction and repair of school buildings,
facilities and equipment, including the acquisition,
titling and improvement of school sites;

3. Educational research;

4. Acquisition/procurement of books, instructional
materials, periodicals and equipment, including IT
resources; and

DECS DBM DILG
Joint Circular (JC) No. 01
s. 1998
April 14, 1998

Prescribing the Rules
and Regulations on the
Utilization of the Special
Education Funds (SEF)
by the Local School Boards
for the Operation
and Maintenance
of Elementary
and Secondary Public
Schools
255

5. Expenses for school sports activities of the
national, regional, division, district, municipal and
barangay levels, including DepEd-related activities
including co-curricular activities.

6. Establishment of new classes as
extensions of existing public elementary or
secondary schools as approved by the DepEd
Secretary, recommended by the DepEd Regional
Director and certified by the Schools Division
Superintendent as to the necessity and urgency of
establishing extension classes in the province, city
and municipality, provided that no extension
classes shall be established unless the number of
pupils shall at least be 15.
7. Payment of compensation of those teaching
personnel who will be hired temporarily in
instances where there are no teaching positions
available in DepEd.

8. Payment of salaries and authorized allowances of
teachers hired to handle new classes as extensions
of existing public elementary or secondary schools
established pursuant to Section 2.1 of DECS-
DBM-DILG JC No. 01-A.



3. Is an Appropriation Ordinance necessary to authorize the utilization
of the SEF?

No. Pursuant to Article 448 of the IRR of R.A. No. 7160, Special Funds,
which include the SEF, shall be deemed automatically appropriated for
purposes indicated therefor.

The allocation of the SEF shall be determined and approved by the Local
School Board (Section 272, R.A. No. 7160).

DECS DBM DILG
JC No. 01-B
June 25, 2001

Further Clarifying Certain
Provisions of DECS, DBM
and DILG JC Nos. 01, s. 1998
and 01-A, s. 2000
April 14, 1998 and March 14,
2000, respectively
DECS DBM DILG
JC No. 01-A
March 14, 2000

Supplemental Provisions
to DECS, DBM and DILG
JC No. 1, s. 1998 dated
14 April 1998
256

4. What is the Budget Process for the SEF?

a. Budget Preparation

Step 1. The budget preparation phase of the SEF starts only after the
official issuance by the LFC of the Estimated Proceeds of the
Special Levy on Real Property, constituting the SEF, and the
criteria set by the DepEd on the annual budgeting needs for the
operation and maintenance of public schools.

Step 2. In accordance with the criteria set by the DepEd, the Local
School Board determines the annual supplemental budgetary
needs for the operation and maintenance of public schools
within the province, city or municipality, as the case may be,
and the supplementary local cost of meeting such needs, which
shall be reflected in the form of an Annual School Board
Budget corresponding to its share of the proceeds of the special
levy on real property constituting the SEF (Section 99 [a], R.A.
No. 7160).

SEF Budget Preparation Form No. 1 is shown on page 258.

Step 3. The division superintendent, city superintendent, or district
supervisor, as the case may be, shall prepare the budget of the
School Board concerned. Such budget shall be supported by
PPAs of the School Board for the ensuing fiscal year (Section
100 [b], R.A. No. 7160).

b. Budget Authorization

Step 4. The SEF budget prepared by the division superintendent, city
superintendent or district supervisor, as the case may be, shall
be submitted to the School Board, chaired/co-chaired by the
LCE and the division superintendents of schools, for approval.
The affirmative vote of the majority of all the members of the
Local School Board shall be necessary to approve the budget
(Section 100 [b], R.A. No. 7160).



257
c. Budget Execution

Step 5. The SEF funds shall be released exclusively for the specific
purpose for which they have been allocated in the approved
School Board Budget.

Step 6. Disbursements shall be made in accordance with the authority
to disburse issued by the Chairman/Co-Chairman of the Local
School Board to the provincial, city, municipal treasurer
(Section 99 [b], R.A. No. 7160), subject to existing accounting
and auditing rules.

d. Budget Accountability

Step 7. A quarterly report of the SEF utilization shall be prepared and
submitted by the Local School Board to the DepEd Regional
Offices (ROs), copy furnished the DBM ROs and the DILG
ROs. The quarterly reports shall be submitted one (1) week
after the end of each quarter. For this purpose, the Report of
SEF Utilization shown in SEF Budget Accountability Form No.
1 hereof shall be used (Item 3.0 of Joint Circular No. 01-A of
DECS, DBM and DILG dated March 14, 2000).


258
SEF Budget Preparation Form No. 1

I IN NC CO OM ME E A AN ND D E EX XP PE EN ND DI IT TU UR RE E E ES ST TI IM MA AT TE ES S F FO OR R F FY Y _ __ __ __ _
P Pr ro ov vi in nc ci ia al l/ /C Ci it ty y/ /M Mu un ni ic ci ip pa al l S Sc ch ho oo ol l B Bo oa ar rd d o of f _ __ __ __ __ __ __ __ __ __ __ _
Province/City/Municipality
(In P000)
Estimated Income for Budget Year
Additional One Percent (1%) Tax on Real Property .. . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Previous Years Unexpended Balances
(including Continuing Appropriation) . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL
Less: Continuing Appropriation
Net Amount Available for Appropriation

Proposed Expenditures for Budget Year
xxx
xxx

xxx
xxx
xxx
xxx


Rank Program/Project/Activity*
Personal
Services
Maintenance
and Other
Operating
Expenses
Capital
Outlays
Total









Total Expenditures for BY ______ xxx xxx xxx xxx
Balance/Deficit xxx
Prepared by:

_____________________________
Division Superintendent/Supervisor
Co-Chairman, LSB

* Please refer to the prioritization on the use of the SEF (DECS-DBM-DILG JC Nos. 01, 01-A and 01-B)










259
SEF Budget Authorization Form No. 01


Provincial/City/Municipality of ___________
Local School Board of ____________
Province/City/Municipality



___________ Regular Session


Begun and held in _______________, _______________, on _______ day of _______,
_______.


Local School Board Resolution No. ________


A RESOLUTION APPROVING THE BUDGET FOR PRIORITY EDUCATION
PROJECTS IN THE PROVINCE/CITY/MUNICIPAL SCHOOL BOARD

Be it resolved by the Local School Board of __________________ in Council assembled:

Section 1. Source of Funds. The following income as indicated herein are hereby declared
as sources of funds, particularly the additional one percent (1%) Tax on Real Property which
are realistic and probable to be collected and remitted to the Local Treasury, necessary to
finance the implementation of priority education projects of the Province/City/Municipality
of _______________ from January one to December thirty-one, two thousand ______,
except otherwise specifically provided herein:

Estimated Income for Budget Year

Additional One Percent (1%) Tax on Real Property P__________
Add: Previous Years Unexpended Balances
(including Continuing Appropriation) __________
Gross Income P__________
Less: Continuing Appropriation __________
Net Amount Available for Appropriation P
=========

Section 2. Allocation of Funds. The following sums are hereby allocated out of the
additional one percent (1%) Tax on Real Property and any unexpended balances thereof in
the Local Treasury of the Province/City/Municipality for the implementation of priority
education projects in the province/city/municipality from January one to December thirty-
one, two thousand ____:

260
Expenditure Program for Budget Year

Rank Program/Project/Activity*
Personal
Services
Maintenance and
Other Operating
Expenses
Capital
Outlays
Total





Total


* Please refer to the prioritization on the use of the SEF (DECS-DBM-DILG JC Nos. 01, 01-A and 01-B)

Expected Output

Rank P/P/A Expected Output Schedule of Delivery


Section 3. Effectivity. This Resolution shall take effect immediately upon its approval.

Date Adopted: _______________________

Carried Unanimously,

Local School Board Members

Names Signatures
___________________ ___________________
___________________ ___________________
___________________ ___________________

I HEREBY CERTIFY to the correctness of the above-quoted Local School Board
Resolution.

__________________________
Secretary-Designate to the LSB
Attested:

______________________
Co-Chairman, LSB
APPROVED:

_________________________
LCE, Chairman, LSB
Date: ____________


261
SEF Budget Accountability Form No. 1


R RE EP PO OR RT T o of f S SE EF F U UT TI IL LI IZ ZA AT TI IO ON N
F Fo or r t th he e Q Qu ua ar rt te er r E En nd di in ng g _ __ __ _

Province/City/Municipality ______________

Receipt from SEF P __________

Less : DISBURSEMENTS (broken down by expense class and
by object of expenditures)

Personal Services
__________________________________ __________
__________________________________ __________
__________________________________ __________

Maintenance and Other Operating Expenses
__________________________________ __________
__________________________________ __________
__________________________________ __________

Capital Outlays
__________________________________ __________
__________________________________ __________
__________________________________ __________

Financial Expenses
__________________________________ __________
__________________________________ __________
__________________________________ __________

Sub-total __________
Balance P
=========

Prepared by:

_____________________________
Local Accountant


Approved by:

____________________________
LCE, Chairman, LSB

262
G. Calamity Fund

1. What is a Calamity?

R.A. No. 8185 defines Calamity as a state of extreme distress or
misfortune, produced by some adverse circumstance or event or any great
misfortune or cause or loss or misery caused by natural forces.


2. What is the legal basis of the Calamity Fund?

The Calamity Fund is one of the budgetary requirements prescribed under
Section 324 (d) of R.A. No. 7160. Said Section was subsequently
amended by R.A. No. 8185.

Section 1 of R.A. No. 8185 provides:

"SECTION 1. Section 324 (d) of Republic Act No. 7160 is hereby
amended to read, as follows:

(d) Five percent (5%) of the estimated revenue from regular
sources shall be set aside as annual lump sum appropriations for
relief, rehabilitation, reconstruction and other works or services in
connection with calamities which may occur during the budget
year. Provided, however, That such fund shall be used only in the
area, or a portion thereof, of the local government unit or other
areas affected by a disaster or a calamity, as determined and
declared by the local sanggunian concerned.

The local development council shall monitor the use and
disbursement of the local calamity fund."


3. What are the guidelines on the use of the Calamity Fund?

Pursuant to Section 324 (d) of R.A. No. 7160 (as amended by R.A. No.
8185), the Calamity Fund may be used for the following activities:

a. For relief, rehabilitation, reconstruction and other works or services in
connection with calamities which may occur during the budget year.
Provided, however, that such Fund shall be used only in the area, or a
portion thereof, of the LGU or other areas affected by a disaster or
263
calamity, as determined and declared by the local Sanggunian
concerned;

b. In case of fire or conflagration, the Calamity Fund shall be used only
for relief operations.

DBM-DILG Joint Memorandum Circular (JMC) No. 2003-1 (Use of
Local Calamity Fund Appropriation for Man-Made Disaster Relief and
Mitigation) dated March 20, 2003 was issued to expand the utilization of
the 5% Calamity Fund.

The Fund may now also be validly used for relief, rehabilitation,
reconstruction and other works or services in connection with man-made
disasters resulting from unlawful acts of insurgents, terrorists and other
criminals, as well as for disaster preparedness and other pre-disaster
activities.

Such relief, rehabilitation, reconstruction and other works or services
including pre-disaster activities in connection with such man-made
disasters may, at the discretion of the LGU concerned, include the
following:

a. Medical assistance, death and funeral benefits to the victims, their
dependents and immediate families, including victims who are
Overseas Filipino Workers (OFWs);

b. Financial assistance and other services for medical, rescue and relief
workers who have been tasked to attend to the victims; and

c. Preparation of relocation sites/facilities, disaster preparedness training
and other pre-disaster activities.

An undated DBM-DILG JMC was issued to provide clarificatory
guidelines on the use of the 5% Calamity Fund, the pertinent provisions
of which read, as follows:

"1.0 Pursuant to the provisions of RA 8185, otherwise known as
An Act Amending Section 324 (d) of RA 7160, otherwise
known as the Local Government Code of 1991, (sic) its
Implementing Rules and Regulations, and Executive Order
No. 201 dated 26 April 2003, it is hereby clarified that the
5% local calamity fund of every local government unit
(LGU) shall be utilized only for the relief, reconstruction,
264
rehabilitation and other works and services, in connection
with a calamity which occurred during the budget year.
Under the aforesaid Act, calamity has been defined as a
state of extreme distress or great misfortune caused by
adverse event or natural force, causing widespread loss or
extensive damage to livestocks, lives, crops and properties.
Accordingly, any adverse event, such as but not limited to,
acts of terrorism and spread of Severe Acute Respiratory
Syndrome (SARS) or other endemics, that could fall within
the ambit of the definition of calamity defined by law, can be
a legal basis for LGUs concerned to declare their own state
of calamity.

2.0 The calamity fund may also be utilized for undertaking
disaster preparedness activities and measures, provided that
the sanggunian concerned shall declare an imminent danger
of calamity. In extreme cases and under extra-ordinary
circumstances, such as but not limited to, acts of terrorism
and outbreak of dangerous and highly communicable
diseases such as SARS, the calamity fund may also be
utilized for disaster preparedness without need of a
sanggunian declaration of calamity provided that there is a
Presidential proclamation of the existence of an adverse
event that would warrant the declaration of the entire
country to be under the state of national calamity, which
needs to be prevented and suppressed.

It must be emphasized, however, that all unexpended balances of the
Calamity Fund shall be reverted to the unappropriated surplus for re-
appropriation during the succeeding budget year. This is provided under
Item b.4 of the IRR of R.A. No. 8185, as follows:

b.4 Any unexpended balance of the Calamity Fund at the end of
the Current Year shall revert to the Unappropriated Surplus
for re-appropriation during the succeeding budget year.

Provided, that the appropriation for capital outlays shall
remain valid until fully spent or reverted.

Provided, further, that in cases as may be determined by the
Sanggunian concerned, the unexpended balance of the
maintenance and other operating expenses portion of the
aforesaid fund in support for the relief, rehabilitation,
265
reconstruction and other works and services undertaken
during the year in connection with the occurrence of the
calamities, the effective implementation of which may extend
beyond the calendar year subject to accounting and auditing
rules and regulations being observed for the purpose."


4. Can motor vehicles (including ambulances) be purchased from the
Calamity Fund?

No. The purchase of motor vehicles, including ambulances, is not
among the purposes for which the Calamity Fund may be used.


5. Can drugs and medicines be purchased out of the Calamity Fund?

Yes. Drugs and medicines may be purchased out of the Calamity
Fund, provided, that the same is necessary for the conduct of relief
operations in connection with a calamity which occurred during the
budget year, in accordance with the other requirements under Section
324 (d) of R.A. No. 7160, as amended by R.A. No. 8185.


6. Can the purchase of drugs and medicines be included as part of
pre-disaster activities for which the Calamity Fund may be used?

Yes. Purchase of drugs and medicines may be included as part of pre-
disaster activities for which the Calamity Fund may be used.

A DBM-DILG JMC re Clarificatory Guidelines on the Use of the 5%
Calamity Fund, provides, among others, as follows:

2.0 The calamity fund may also be utilized for undertaking
disaster preparedness activities and measures, provided that
the sanggunian concerned shall declare an imminent danger
of calamity. In extreme cases and under extra-ordinary
circumstances, such as but not limited to, acts of terrorism
and outbreak of dangerous and highly communicable
diseases such as SARS, the calamity fund may also be
utilized for disaster preparedness without need of a
sanggunian declaration of calamity provided that there is a
Presidential proclamation of the existence of an adverse
event that would warrant the declaration of the entire
266
country to be under the state of national calamity, which
needs to be prevented and suppressed. (emphasis supplied)


7. Can the provision for Calamity Fund exceed 5% of the estimated
revenue from regular sources?

No. Section 324 (d) of R.A. No. 7160 prescribes that 5% of the
estimated revenue from regular sources shall be set aside as an annual
lump sum appropriation for unforeseen expenditures arising from the
occurrence of calamities. Accordingly, LGUs should provide the
exact 5% requirement.

On the other hand, any additional requirement may be provided
through the enactment of a supplemental budget. Section 321 of R.A.
No. 7160, as implemented by Article 417of its IRR as amended by
A.O. No. 47, provides that in times of public calamity, a supplemental
budget may be enacted by way of budgetary realignment to set aside
appropriations for the purchase of supplies and materials or the
payment of services, which are exceptionally urgent or absolutely
indispensable to prevent imminent danger to, or loss of, life or
property, in the jurisdiction of the LGU or in other areas declared in a
state of calamity by the President.


H. Allocation to Local Government Units

1. Are barangays created by local government units after the
effectivity of R.A. No. 7160 entitled to IRA shares?

No. The financial requirements of barangays created by local
government units after the effectivity of R.A. No. 7160 shall be the
responsibility of the local government unit concerned (Section 285,
R.A. No. 7160).


4. For purposes of determining the IRA allocation of LGUs based on
land area, can the DBM adjust the IRA of the LGU concerned
based on the individual certification issued by the Land
Management Bureau (LMB) to LGUs?

Under R.A. No. 7160, all issues affecting land area falls under the
function of the LMB-Department of Natural Resources (DENR). For
267
purposes of IRA computation based on land area, any change in the
land area shall be made every 3
rd
year after 1999 per the consolidated
masterlist of land area to be submitted by the LMB-DENR to DBM on
or before December 15.

In the ARMM, the request of the LMB-ARMM for land area
adjustment of LGU shall be endorsed by the DENR-ARMM and
approved by the Regional ARMM Governor for final
endorsement/submission to the Secretary of the DENR.


I. Aid to Barangays

1. What is the legal basis for the provision of Aid to Barangays?

Section 324 (c) of R.A. No. 7160 provides that, In the case of provinces,
cities, and municipalities, aid to component barangays shall be provided
in amounts of not less than One thousand pesos (P1,000.00) per
barangay;


J. Premium Subsidy for Indigents under the National Health
Insurance Program

1. What is the legal basis for providing Premium Subsidy for Indigents
under the National Health Insurance Program?

The legal basis for providing Premium Subsidy for Indigents under the
National Health Insurance Program is R.A. No. 7875 dated July 25, 1994
entitled, An Act Instituting a National Health Insurance Program for All
Filipinos and Establishing the Philippine Health Insurance Corporation
for the Purpose.

Premium Sharing Scheme Between the National Government (NG)
and LGUs
Particulars NG LGU
1
st
to 3
rd
class LGUs (1
st
6
th
year and onwards) 50% 50%
4
th
to 6
th
class LGUs
1
st
and 2
nd
years of program implementation 90% 10%
3
rd
year of program implementation 80% 20%
4
th
year of program implementation 70% 30%
268
5
th
year of program implementation 60% 40%
6
th
year and onwards 50% 50%


2. What is the purpose of the Fund?

The amount appropriated in the GAA represents financial assistance to
LGUs as National Government (NG) counterpart for the premium
contributions of indigents enrolled in the National Health Insurance
Program in accordance with the premium sharing scheme between the
NG and the LGUs.


K. Gender and Development (GAD)

1. What is GAD?

GAD is an approach to development that focuses on how social,
economic, political and cultural forces determine how differently women
and men participate in, benefit from, and control resources and activities
for development. It recognizes the different roles, responsibilities,
expectations, interests, needs, and contributions of men and women in
society and integrates these gender concerns in the development planning
process. GAD recognizes women as agents of development and not
merely as passive recipients of development assistance.


2. What are the legal bases for GAD, and GAD Planning and
Budgeting?

R.A. No. 7192 and Executive Order (E.O.) No. 273 mandate agencies,
including LGUs, to institutionalize GAD in government by incorporating
the GAD concerns in their planning, programming and budgeting
process.

The allocation of funds for the implementation of a GAD Plan is a
statutory requirement that must be complied with by provinces, cities,
municipalities and barangays.

The Philippine Plan for Gender-Responsive Development (PPGD), 1995-
2025, which was adopted through E.O. No. 273, specifies the services
269
that must be implemented for women in relation to those stipulated in
R.A. No. 7160.

DBM-NEDA-NCRFW JC No. 2004-1 (superseding DBM-NEDA-
NCRFW JC No. 2001-01) provides the guidelines for the preparation of
annual GAD Plan and Budget and Accomplishment Report to implement
the Section on programs/projects related to GAD as provided in the
annual GAA.

For a more comprehensive discussion on GAD, refer to the Primer on
Gender Mainstreaming and Institutionalization in the Budgeting Process,
August 2002, issued jointly by the DBM and NCRFW through the
support of the Canadian International Development Agency.


3. What is a GAD Plan?

A GAD Plan is a tool for gender mainstreaming. A GAD Plan is a
systematically designed set of PPAs carried out by agencies for a given
period of time to address gender issues and concerns of their respective
sectors and constituents, specifying the targets to be achieved and
identifying the performance indicators that will measure their
accomplishments.

The GAD Plan is viewed as an integral part of the overall LGU plan. The
formulation of a GAD Plan shall follow the regular planning and budget
calendar/schedule of LGUs and shall be anchored on the existing
Comprehensive Land Use Plan, Provincial Development and Physical
Framework Plan/Comprehensive Development Plan, Local Development
Investment Program and Annual Investment Program (AIP) preparation.


4. What is a GAD Budget?

A GAD Budget is the total amount provided in the General Fund Budget
of the LGU to finance the PPAs in the GAD Plan.

The earmarking of at least 5% of the total annual appropriation for
GAD-related activities is an indicative figure that should be attributed in
the existing PPAs of LGUs budgets.

270
Accordingly, the GAD budget must not be interpreted as an
additional and separate fund that will be provided by the national or
local government.


5. How is the GAD Budget prepared?

The GAD Budget is prepared based on the estimated costs of functions
and PPAs translated from the demands/commitments identified in the
GAD Plan. The GAD Focal Point Chairperson, in close coordination
with the LGUs Budget Officer, shall be responsible for the preparation
of the GAD Budget. The review of the GAD budget proposal is done
following the regular evaluation process applicable to the regular budget
proposal, of which the GAD Budget is a component.

In the determination of expenditure ceilings in terms of sectoral service
and nature of expenditure as basis for budget preparation, the LFC shall
ensure that the GAD Plan, approved by the LDC and the Sanggunian, are
considered as among the primary source documents used.

The costs of functions and PPAs to implement the GAD Plan may include
any or all of the following items:

Personal Services;
Maintenance and Other Operating Expenses; and
Capital Outlays.

The GAD PPAs may be classified into:

b. Organization-focused, where efforts are geared to respond to
gender issues that affect the welfare and performance of women
and men employees of the LGU; and

c. Client-focused, where efforts address gender issues that affect
the LGUs clients and/or constituents.


6. When is the GAD Budget implemented?

Inasmuch as the GAD Budget is attributed in the existing PPAs of LGUs
budgets, the implementation of such PPAs would mean the
implementation of the GAD Budget.

271

7. How are the GAD Plan and Budget reported and monitored?

As required under DILG-DBM-NCRFW JC No. 2001-01, LGUs shall
submit to the DILG Provincial/City and Municipal Offices their GAD
accomplishment reports not later than the end of January of the ensuing
year.

The subsequent reporting and monitoring activities to be undertaken by
the DILG are specified in the said JC.


L. Senior Citizens and the Differently-Abled

1. What are the legal bases for providing a budget for senior citizens
and the differently-abled?

In support of the Philippine Plan of Action for Older Persons, 2005-2009,
the cost of implementing plans, programs and projects intended to
address the concerns of senior citizens and the differently-abled shall be
at least one percent (1%) of the agencys total annual appropriations. This
is anchored on the provisions of various laws and administrative
issuances:

a. E.O. No. 266, Approving and Adopting the Philippine Plan of
Action for Older Persons (PPAOP), 1999-2004, created an Inter-
Agency Committee chaired by the DSWD to ensure, coordinate,
monitor and evaluate the implementation of the PPAOP;

b. R.A. No. 7432, An Act to Maximize the Contribution of Senior
Citizens to Nation Building, Grant Benefits and Special Privileges
and for Other Purposes, motivating and encouraging senior
citizens to contribute to nation building and to mobilize their
families and community, among others;

c. R.A. No. 7876, An Act Establishing a Senior Citizens Center in
All Cities and Municipalities of the Philippines, and Appropriating
Funds Therefor, wherein senior citizens centers are intended to be
used as venues for the delivery of integrated and comprehensive
social services to senior citizens and other members of the
community;

272

d. R.A. No. 7277, the Magna Carta for Disabled Persons, declaring
the rights and privileges of persons with disabilities to equal
opportunities in employment, education, health, auxiliary social
services, telecommunications, accessibility and political and civil
exercises; and

e. Proclamation No. 240, Declaring the Period from the Year 2003
to the Year 2012 as the Philippine Decade of Persons with
Disabilities and citing the 1% of the agency appropriations as fund
source, as required under the applicable provision of the annual
GAA.

f. DBM-Department of Social Welfare and Development (DSWD)
JC No. 2003-01 dated April 28, 2003, which states:

3.0 Coverage

The provisions of this Joint Circular shall cover all
national government agencies, executive departments,
bureaus, offices, agencies, commissions, state
universities and colleges.

Consistent with the provisions stated in section 29,
government financial institutions, government-owned
and controlled corporations and local government
units, shall issue separate guidelines to their respective
Boards or Sangguniang Bayan.


M. Personal Services Limitation

1. What is Personal Services?

Personal Services (PS) refer to appropriations for the payment of salaries,
wages and other compensation of permanent, temporary, contractual, and
casual employees of the LGU (Section 306 [k], R.A. No. 7160).

For purposes of computing the 45%/55% PS Limitation, the "other
compensation" as referred to therein and as determined pursuant to A.O.
No. 42 dated March 3, 1993 issued by the President consists of the
following:

273
a. Statutory and Contractual Obligations
Employees Compensation Insurance Premiums (ECIP);
Health Insurance Contributions (HIC);
Pag-IBIG Contributions (Pag-IBIG);
Life and Retirement Insurance Contributions (LRIC); and
Retirement Gratuity and Terminal Leave (RG/TL) Benefits.

b. Authorized Allowances/Benefits
Additional Compensation (ADCOM);
Personnel Economic Relief Allowance (PERA);
Uniform/Clothing Allowance (U/CA);
Productivity Incentive Benefits (PIB);
Commutable and Representation and Transportation
Allowances (RATA);
Year-end Benefits (YEB);
Step Increments for Length of Service;
Magna Carta Benefits of PHWs;
Per diem of LGU officials/employees;
Specialists' Fees and Allowances (when there is employer-
employee relationship); and
All other legally authorized allowances/benefits of officials and
employees of LGUs.

c. Lump-sum Appropriations
Lump-sum for Salary Adjustments;
Lump-sum for Creation of New Positions;
Lump-sum for Casual/Contractual Positions; and
Lump-sum for Adoption of Higher Salary Schedule.


2. What is the legal basis for Personal Services (PS) Limitation?

The limitation of appropriations for PS for LGUs is provided under
Section 325 (a) for provinces, cities and municipalities, and Section 331
(b) for barangays, of R.A. No. 7160, which, respectively, provides:

SEC. 325. General Limitations. The use of the provincial, city,
and municipal funds shall be subject to the following limitations:

(a) The total appropriations, whether annual or
supplemental, for personal services of a local
government unit for one (1) fiscal year shall not
274
exceed forty-five percent (45%) in the case of first to
third class provinces, cities, and municipalities, and
fifty-five percent (55%) in the case of fourth class or
lower, of the total annual income from regular
sources realized in the next preceding fiscal year. The
appropriations for salaries, wages, representation and
transportation allowances of officials and employees
of the public utilities and economic enterprises owned,
operated, and maintained by the local government
unit concerned shall not be included in the annual
budget or in the computation of the maximum amount
for personal services. The appropriations for the
personal services of such economic enterprises shall
be charged to their respective budget;

SEC. 331. Preparation of the Barangay Budget.

x x x

(b) The total appropriations for personal services of a
barangay for one (1) fiscal year shall not exceed fifty-
five (55%) of the total annual income actually realized
from local sources during the next preceding fiscal
year.


3. What are the guidelines on PS Limitation?

Local Budget Circular (LBC) No. 75 dated July 12, 2002 was issued to
provide the guidelines on the preparation and review of the PS
component of the annual and supplemental budgets of LGUs, in relation
to the waiver on the PS Limitation under Sections 325 (a) and 331 (b) of
R.A. No. 7160.

a. The PS Limitation/Cap is the amount equivalent to 45% of the total
income from regular sources earned in the next preceding fiscal year
for 1
st
to 3
rd
class provinces/cities/municipalities, or 55% for lower
class LGUs, including barangays.

b. In formulating the budget of LGUs, the total allowable PS level must
first be computed. For example:


275
LGU A (4
th
Class Municipality) Budget Year 2008

Total Income from Regular
Sources realized in FY 2006 P50,000,000
Multiply by PS Limitation/Cap Rate 55%_
Allowable PS Level P27,500,000
===========

c. The second step is to determine the total PS cost that provides for the
following priorities:

Salaries of existing regular personnel
(including devolved and mandatory positions)

Statutory and contractual obligations
(ECIP, HIC, Pag-IBIG, RLIP [now, LRIC],
RG and TL Benefits)

Authorized allowances/benefits
(including Magna Carta Benefits of Public Health
Workers [PHWs])

Waived items

d. If the total PS cost as prioritized exceeds the PS Limitation/Cap (e.g.,
total PS cost for LGU A above is P30,000,000 vs. computed PS Cap
of P27,500,000), the LGU can no longer provide for additional PS
items until such time that the PS Cap is observed. However, if the PS
Cap is not exceeded after providing for the priorities (e.g., total PS
cost for LGU A above is P26,000,000 vs. computed PS Cap of
P27,500,000), the LGU may still be allowed to provide additional PS
items to the extent of the difference between the computed PS cost and
the PS Cap.


4. What are the PS items that are waived?

The PS Limitation/Cap shall be waived on the following PS items and
activities mandated by law:

a. Absorption of national government personnel transferred on
account of devolution;
b. Absorption of the cost of devolved hospital services transferred
from the province, in the case of newly-created cities;
276
c. Creation of mandatory positions specified under R.A. No. 7160;
d. Continued implementation of the Compensation Standardization
Law authorized under R.A. No. 6758, as amended, R.A. No. 7160,
and as provided under existing standards, guidelines, rules and
regulations;
e. Cash gifts for barangay officials;
f. Payment of the Magna Carta benefits of PHWs;
g. Payment of the RG/TL benefits; and
h. Payment of the monetization of leave credits of employees.



N. Creation of Positions

1. What is the general rule on creation of positions in LGUs?

Section 76 of R.A. No. 7160 empowers LGUs to design and implement
their own organizational structure and staffing pattern that will
effectively address their respective developmental plans, programs,
objectives and priorities. The creation of positions shall be consistent
with the rules and regulations established under Civil Service
Commission (CSC) Memorandum Circular No. 19, series of 1992.

Further, per existing policy, creation of non-mandatory positions and
offices in LGUs may be allowed subject to the following conditions:

That they are priority needs as identified by the LCE, the
Sanggunian and/or LDCs concerned consistent with Section 17
of R.A. No. 7160;
All mandatory positions stipulated under R.A. No. 7160 have
been created and provided;
The SSL has been fully implemented;
The devolution has been fully effected;
The general limitations on PS expenditures are not exceeded;
and
The classification of the positions is consistent with the
standards and implementing rules and regulations of R.A. No.
6758.




277
2. Can the LGU create new positions without corresponding
appropriations?

R.A. No. 7160 provides that the Sanggunian shall determine the
positions and the salaries, wages, allowances and other emoluments
and benefits of officials and employees paid wholly or mainly from
local funds and provide for expenditures necessary for the proper
conduct of programs, projects, services and activities of the local
government (Section 447 [a][1][viii]; Section 458 [a][1][viii]; and
Section 468 [a][1][viii], R.A. No. 7160).

Accordingly, any position created in the LGU shall be adequately
provided with funding requirements for basic salary, including the
associated compensation attached to the position such as allowances,
RATA if entitled thereto, year-end benefits, etc., for it to be
considered a properly created position. Otherwise, a position is not
deemed properly created if such had not been fully provided
corresponding appropriations for basic salary and other compensation.


3. Are unfunded positions considered vacant and deemed to be
abolished?

A vacant position is an authorized position in the official plantilla
which is unfilled. Although vacant, the same is covered by adequate
appropriation for salaries and associated compensation costs.

On the other hand, unfunded positions, that is, those not covered by
funds for salaries and associated compensation costs, should be
deleted in the plantilla since there are no appropriations to back up
their legal existence.


O. Local Government Economic Enterprises and Public Utilities

1. What are the legal bases for the establishment and development of
Local Economic Enterprises and Public Utilities?

The bases for the establishment and development of local economic
enterprises and public utilities are contained in Section 22 (d), Section
313 and Section 325 (a) of R.A. No. 7160, quoted as follows:

278
SEC. 22. Corporate Powers. x x x

a) Local government units shall enjoy full autonomy in the
exercise of their proprietary functions and in the
management of their economic enterprises, subject to
the limitations provided in this Code and other
applicable laws.

SEC. 313. Special Accounts to be Maintained in the General
Fund. Local government units shall maintain special accounts in
the general fund for the following:

(a) Public utilities and other economic enterprises;

x x x

Profits or income derived from the operation of public utilities and
other economic enterprises, after deduction for the cost of
improvement, repair and other related expenses of the public utility
or economic enterprise concerned, shall first be applied for the
return of the advances or loans made therefor. Any excess shall
form part of the general fund of the local government unit
concerned.

SEC. 325. General Limitations. - x x x

(a) The appropriations for salaries, wages, representation
and transportation allowances of officials and
employees of public utilities and economic enterprises
owned, operated, and maintained by the local
government unit concerned shall not be included in
the annual budget or in the computation of the
maximum amount for personal services. The
appropriations for the personal services of such
economic enterprises shall be charged to their
respective budgets;


2. How may Local Economic Enterprises and Public Utilities be
differentiated?

Economic Enterprises are income-generating establishments created
for the purpose of improving production and delivery of basic goods
279
or services for a specific market or client group which may include,
but are not limited to:

a. Public markets or shopping malls;
b. Slaughterhouses;
c. Cemeteries;
d. Sports, cultural and recreation centers;
e. Parking lots;
f. Ice plants;
g. Hospitals; and
h. Special and tertiary schools.

Public Utilities are revenue-raising undertakings created for the purpose
of providing a basic need or service to the general public which otherwise
cannot be provided adequately by the private sector which may include,
but are not limited to:

a. Water and sewerage services;
b. Garbage collection and disposal;
c. Telephone system;
d. Electric and power services; and
e. Public transport and terminal station services.


3. What are the general guidelines for the establishment of Local
Economic Enterprises and Public Utilities?

An economic enterprise or public utility may be established after the
conduct of a feasibility study showing proof of its economic and social
viability in the long term.

A business development plan for the economic enterprise should be
prepared (long-term, medium-term and annual plan) stating its mission
or purpose, clients or beneficiaries, strategies, activities and projects,
organizational structure, financial plan or budget and expected returns.

The rationale and criteria for the establishment and operation of local
economic enterprises and public utilities are:

a. It satisfies both the economic and social objectives of the local
government unit (LGU) concerned.
b. It fills in service gaps not adequately provided by the private
sector.
280
c. It shall operate with a lean and mean staffing complement to
satisfy its income objective.
d. It shall operate like a corporate body with a separate strategic
plan and budget.

Economic enterprises and public utilities shall be adopted and
approved by the Local Development Council (LDC) after subjecting
the proposal to public hearings and deliberations by concerned sectors
and stakeholders.

The local Sanggunian shall authorize the creation of an economic
enterprise or public utility through the enactment of an ordinance
citing the justifications thereto as to its viability or capacity to exist on
its own funds.

The budget for economic enterprise and public utility shall be
presented separately under the General Fund Annual Budget of the
local government, subject to the usual accounting and budgeting
processes.

The initial operating requirements of economic enterprises and public
utilities may be treated as advances or loans to be specifically
appropriated by the local government concerned in its Annual Budget.
After two years of operation, or as reflected in its business
development plan, the funding requirements of economic enterprises
and public utilities shall be sourced from its operating income or user
fees.

The determination of the rates to be charged as user fees shall use the
criteria of affordability, economic viability, and social responsibility.

A balance between economic and social gains shall be the guiding
principle in the final establishment of economic enterprises and public
utilities. To attain this, proper consultation with stakeholders and
beneficiaries of the project shall be conducted through formal public
hearings until a final consensus or agreement is reached.

No user fees shall be charged unless a majority of the stakeholders
have agreed on the rates to be charged. An ordinance relative to user
fees shall be enacted by the local Sanggunian and elevated to a higher
Sanggunian level for final approval.

281
The capital outlay requirements (buildings, equipments, land, etc.) of
economic enterprises and public utilities shall be treated as an
investment or part of the development project of the LGU, which may
be charged against the 20% of the IRA for development projects. If
viable and bankable, the economic enterprise/public utility capital
outlay requirements may be financed through any of the credit
financing conduits.

Local economic enterprises and public utilities may be staffed initially
with any of the following:

Casual or contractual personnel hired for the economic
enterprise/public utility

Regular staff of the LGU on detail

Only when the economic enterprise/public utility has become viable
may regular positions be created for the purpose. These regular
positions shall be funded solely from the income of the economic
enterprise/public utility which is separate from the General Fund
Annual Budget of the LGU. The Personal Services (PS) requirements
of economic enterprises and public utilities shall not be included in the
computation of the maximum amount for PS of the LGU for purposes
of determining the PS Limitation provided under Section 325 (a) of
R.A. No. 7160.

Nevertheless, PS requirements of regular staff of the LGU on detail
with the economic enterprise/public utility shall be included in the
computation of the PS Limitation of the LGU concerned.

LGUs shall maintain special accounts in the General Fund for the
economic enterprises and public utilities that it operates, as provided
in Section 313 of R.A. No. 7160. Profits or income derived from the
operation of economic enterprises and public utilities shall first be
applied for the following:

Cost of improvement, repair, and other related expenses of the
public utility or economic enterprise concerned; and

Return of the advances or loans made for the public utility or
economic enterprise.

282
Any excess shall form part of the General Fund of the LGU
concerned.


4. Should the budget for a Local Economic Enterprise/Public Utility
be submitted for authorization by the Sanggunian?

Yes. The budget for a local economic enterprise/public utility should
be authorized by the Sanggunian through an Appropriation Ordinance
pursuant to Section 325 of R.A. No. 7160.





























283
REFERENCES

1. Barcillano, Malu C., Ph.D. The Technology of Participation (ToP) and
Its Application.

2. Celestino, Alice. Public-Private Sector Partnership for Urban
Infrastructure: The Build-Operate-Transfer Program of Mandaluyong
City, Sourcebook 1: Perspectives and Approaches in Local Government
Resource Management, 2007.

3. DBM-COA Joint Circular No. 93-2 dated 8 June 1993, Local
Government Budget Manual.

4. DBM-NEDA-DILG-DOF Joint Memorandum Circular (JMC) No. 1,
Series of 2007 dated 8 March 2007.

5. DBM. Local Government Budgeting Manual, 1998.

6. DBM. Updated Budget Operations Manual (UBOM), 2005 Edition.

7. New Government Accounting System (NGAS). Revised Philippine
Government Chart of Accounts. Commission on Audit (COA) Circular
No. 2008-001.

8. Segovia, Perla A. with Alvina, Nino B. Local Resource Management and
Fiscal Sustainability: The Case of Naga City; Sourcebook 4: Selected
Cases on Strengthening Local Government Resource Management, 2007.

9. Spencer, Laura. Winning Through Participation. Institute of Cultural
Affairs.

10. Sustainable Human Development. Management Development
Governance Division, Bureau of Policy Development, UNDP (April
1998).

11. Technology of Participation: Basic Group Facilitation Method Course
Manual for Trainers. Governance and Local Democracy Project, United
States Agency for International Development, Manila, 1999.

12. The 1991 Local Government Code or Republic Act (R.A.) no. 7160 and
its Implementing Rules and Regulations.

13. UNDP Policy Paper on Good Governance