COMMISSION ON AUDIT MEMORANDUM NO.

97-004 January 24, 1997

TO : The Assistant Commissioner, Local Government Audit Office; All Directors, COA
Regional Offices; Provincial/City/Municipal Auditors; and Others Concerned.

SUBJECT: DILG MC 96-263 dated December 9, 1996 entitled, Amendment to

Memorandum Circular No. 95-216 dated December 14, 1995 Policies and
Guidelines on the Utilization of the Twenty Percent (20%) Development Fund
and Related Matters.

Enclosed is a copy of the subject Memorandum Circular No. 96-263 of the Department of
Interior and Local Government, for your information and/or guidance in audit.

(SGD.) CELSO D. GAÑGAN, Chairman

 REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT
Francisco Gold Condominium II Edsa cor.
Mapagmahal St. Diliman, Quezon City

MEMORANDUM CIRCULAR
NO. 96-263 December 9, 1996

TO : ALL PROVINCIAL GOVERNORS, CITY MAYORS, MUNICIPAL MAYORS,

PUNONG BARANGAYS, DILG REGIONAL DIRECTORS AND OTHERS
CONCERNED

SUBJECT: AMENDMENT TO MEMORANDUM CIRCULAR NO. 95-216 DATED

DECEMBER 14, 1995 ENTITLED, " POLICIES AND GUIDELINES ON THE
UTILIZATION OF THE TWENTY PERCENT (20%) DEVELOPMENT FUND AND
RELATED MATTERS "

I. PREFATORY STATEMENT

Section 287 of the Local Government Code mandates each local government unit (LGU)
to appropriate in the Annual Budget, at least 20% of the Internal Revenue Allotment (IRA) for
development projects. Furthermore in the Memorandum from the President dated June 17,
1995, on the subject, "Recommendation Raised During the Gathering for Human and
Ecological Security", all LGUs were likewise directed to prioritize human and ecological
security concerns in existing and future community development programs by providing at
least 20% out of the 20% Development Fund to finance programs that address human and
ecological security.

While the Local Government Code empowers local authorities to manage their internal
affairs consistent with the notion of local autonomy, it cannot be overemphasized that part of
the responsibilities of the national government is to ensure that public funds, especially the
20% Development Fund, shall be appropriated and disbursed only for the very purpose or
purposes for which such funds are intended.

II. GENERAL POLICIES AND GUIDELINES

Towards this end, and in support of meaningful development at the local level,
Memorandum Circular No. 95-216 is hereby amended to read, as follows:

General Policies

1. The utilization of the 20% Development Fund shall be limited to development

programs, projects or activities that directly generate jobs and livelihood
opportunities. Provided, That financial allocation for welfare programs and services
in favor of the needy and the marginalized sectors in the locality may be augmented
 from out of the 20% Development Fund during calamities or disasters.

2. The local government Annual Investment Plan (AIP) shall clearly specify the
programs, projects or activities that are to be funded out of the 20% Development
Fund. A copy of the AIP shall be furnished the Field Offices of the Department of
the Interior and Local Government, for monitoring and other general supervision-
related efforts. Each LGU shall likewise provide a copy of the AIP to the
Commission on Audits Field Office concerned.

3. Any reverted unexpended balance of the 20% Development Fund during the year
shall be reappropriated to finance only those development programs, projects or
activities identified to be funded under the 20% Development Fund for the ensuing
year.

4. Employable skills-oriented training and similar activities in support of job generation

and livelihood promotion efforts may be funded out of the 20% Development Fund.

5. Local government internal capability-building training and similar activities shall be

chargeable against other locally-generated funds and the IRA, except from the 20%
Development Fund component of the IRA.

6. The 20% Development Fund, or part thereof, may be appropriated and disbursed
for the procurement, or rent, of a brand new or reconditioned heavy equipment for
infrastructure or agricultural development projects and other development
undertakings. Provided, That the purchase of a reconditioned equipment shall only
be allowed among 4th to 6th Income Class LGUs. Provided Further, That the
economic life span of the purchased reconditioned equipment shall not be less than
five (5) years as certified by the Provincial Engineer. Provided Finally, That the
purchase of a brand new or reconditioned heavy equipment shall not prejudice jobs
and livelihood opportunities.

7. The use of the 20% Development Fund, or part thereof, for the purchase of a heavy
equipment for infrastructure projects or other development activities shall first be
approved by the Secretary of the interior and Local Government.

Program, Project and Activity Coverage

Expenditures from out of the 20% Development Fund shall be limited to the following
sectoral programs, projects or activities.

1. Social Development

(a) Human and Ecological Security Initiatives (20% of the 20% Development
Fund) which shall include, but not limited to, the following:

(i) Comprehensive solid waste management, including the purchase or rent

of a new or reconditioned equipment such as garbage trucks, garbage
compactor trucks and small incinerators, as well as, the purchase of land
for sanitary landfill;
 (ii) Purchase of lot for hospitals, health centers, day care centers and similar
facilities, including their construction, repair or maintenance;

(iii) Purchase of lot for the resettlement of squatters, including the

construction of housing units and facilities;

(iv) Purchase of lot for public parks, including maintenance, as well as, labor-
intensive cleaning and greening of built-up areas, and community
reforestation projects;

(v) Purchase of medicine and other medical supplies and equipment, and
basic commodities' assistance for the displaced and the needy in times
of disasters and calamities; and

(vi) Youth Welfare and Development Programs, e.g., drug abuse prevention,
control and rehabilitation, out of school education efforts, job placement
and referral, community-based physical fitness and sports development,
and related projects or activities.

(vii) Land use plan preparation and zoning

(b) Social Reform Agenda

(c) Kabuhayan 2000

(d) Tourism development and promotion

(e) Other social development undertakings which are highly supportive of job
generation and livelihood opportunities

2. Economic Development

(a) Seedling nurseries, agricultural demonstration farms and animal breeding

stations, including the purchase or rent of implements

(b) Cooperative development

(c) Livestock dispersal

(d) Fishery development and fish culture farming

(e) Local investment promotion

(f) Other economic development undertakings which are highly supportive of job
generation and livelihood opportunities

3. Infrastructure Development

(a) Construction, repair, or maintenance of:

(i) agricultural post-harvest and similar facilities;

 (ii) irrigation system and related facilities;

(iii) provincial, city, municipal, or barangay roads and bridges, including all
devolved infrastructure undertakings;

(iv) water and sewerage system, as well as, power and communication
facilities; and

(v) public buildings, such as, but not limited to the following:

- Provincial capitol, city hall, municipal hall and barangay hall;

- Public schools and reading centers; and

- Public markets and slaughterhouses,

including the purchase, or rent, of a brand new or reconditioned heavy

equipment necessary in the implementation of such infrastructure
undertakings

(b) Development of industrial parks or areas

4. Development Administration

(a) Formation of international and national linkages, through the sponsorship or

hosting of international or national events, such as Palarong Pambansa,
LGUIympics, National or World Scouts Jamboree and national or international
conferences

(b) Local government-sponsored Trainors Training intended for job generation

and livelihood opportunities

(c) Pre-investment studies as part of investment projects intended to generate

jobs and livelihood opportunities

III. AUTHORITY TO USE THE 20% DEVELOPMENT FUND

The use of the 20% Development Fund for the purchase of a brand new or reconditioned
heavy equipment for infrastructure projects and other development undertakings that require
heavy equipment, e.g., solid waste management, shall first be approved by the Secretary of
the Interior and Local Government. Any request for the use of the 20% Development Fund, or
any part thereof, for the purchase of heavy equipment shall be endorsed by the DILG Regional
Office concerned, through the Bureau of Local Government Supervision for final processing
and evaluation, to the Secretary of the Interior and Local Government, together with the
following supporting documents, namely:

1. Approved Annual Procurement Program specifying therein, the heavy equipment to

be purchased;
 2. Approved Annual Budget indicating the amount appropriated for the heavy
equipment to be purchased;

3. Certification from the Treasurer, and attested by the Local Chief Executive
concerned, as to the source of fund, except the 20% Development Fund, for the
maintenance of the heavy equipment to be purchased;

4. Certification from the Local Chief Executive concerned as to how the heavy
equipment to be purchased shall directly generate jobs or livelihood opportunities,
for whom and how, and other relevant information; and

5. Certification from the Provincial Engineer, and attested by the Local Chief Executive
concerned, as to the useful economic life of the reconditioned heavy equipment to
be purchased.

IV. TECHNICAL ASSISTANCE

All Department Field Officers (PLGOOs, CLGOOs, and MLGOOs) are hereby directed to
provide the necessary technical assistance in the preparation of the AIP, as a gesture of
Department's full support to overall efforts aimed at enhancing local government capabilities in
job generation and livelihood promotion, among other significant development concerns.

V. MONITORING AND REPORTING SYSTEM

For the purpose of effectively monitoring the utilization of the 20% Development Fund,
the following guidelines and procedures are herein prescribed:

1. MLGOOs and CLGOOs of component shall monitor the compliance of

municipalities and component cities, respectively, including component barangays,
call attention to non-compliance for remedial action(s), and shall submit a report
highlighting non-complying LGUs, to the PLGOOs concerned, not later than the
10th day of the ensuing month following the end of the semester;

2. CLGOOs of highly urbanized cities shall monitor the compliance of highly urbanized
cities, including component barangays, call attention to non-compliance for remedial
action(s), and shall submit a report highlighting non-complying LGUs, to the
Regional Directors concerned, not later than the 15th day of the ensuing month
following the end of the semester;

3. PLGOOs shall monitor the compliance of the provinces, call attention to non-
compliance for remedial action (s), and shall submit a non-compliance report to
include the compilation of reports from MLGOOs and CLGOOs of component cities,
to the Regional Directors concerned, not later than the 30th day of the ensuing
month following the end of the semester;

4. Regional Directors shall submit a compilation of reports from Department Field

offices to the OSEC, through the BLGS, not later than the 15th day of the second
month immediately following the end of the semester, copy furnished concerned
Regional Offices of the Commission on Audit; and
 5. The Bureau of Local Government Supervision, this Department, shall compile all
reports from the Regional Offices, and shall submit a final report to the Office of the
Secretary, not later than the 15th day of the third month immediately following the
end of the semester, copy furnished the Local Government Audit Office of the
Commission on Audit.

VI. SANCTIONS

Any local official, who willfully or through negligence violates any of the provisions of this
Memorandum Circular, shall be subject to the sanctions provided under the Local Government
Code and under such other applicable laws.

VII. REPEALING CLAUSE

All existing Department policies which are deemed inconsistent herewith, are hereby
modified or repealed accordingly.

VIII. EFFECTIVITY

This Memorandum Circular shall take effect immediately.

(SGD.) ROBERT Z. BARBERS

Secretary