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2008 BOM - FinalManuscript PDF
2008 BOM - FinalManuscript PDF
ADVOCACIES ON PARTICIPATIVE
BUDGETING AND PLAN-BUDGET
LINKAGE
1
Chapter 1. Participative Budgeting in Local
Governance
1.0 Introduction
2
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.
Empowerment
Commitment
3
decisions that affect their lives and the well-being of their communities.
LGUs are encouraged to adopt the new approach.
4
allocations and integrates strategic responses to local issues
through collective decision-making which is in keeping with
good governance.
5
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:
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.
Digital Governance
Formal Institutions
Local Development Council (LDC)
Local School Board (LSB)
Local Health Board (LHB)
Workshops
6
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.
7
5.0 Benefits of Participative Governance in the Budget Process
8
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.
Budget Preparation
9
Budget Authorization
Budget Review
Budget Execution
Step 7 Stakeholders may also assist the LGU in providing for the
service gaps due to fund constraint.
Budget Accountability
10
8.1 Skilled Facilitators
_____________
*Barcillano, Malu C., Ph.D. The Technology of Participation (ToP) and its Application
11
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.
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.
12
Mandaluyong Citys Marketplace: A Joint Venture with the Private Sector2
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 expected 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.
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-
13
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.
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).
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
14
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).
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.
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.
15
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.
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.
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 perennial traffic problem in the area was solved. The commercial complex
provided for a two-level parking facility. Flooding, pollution, and garbage
16
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.
17
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
18
Plan-Budget Linkage
1.0 Introduction
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).
19
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.
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
20
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).
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.
21
The plan-budget linkage is shown in the following diagram:
DEVELOPM ENT
PLAN PDPFP/CDP PLANNING
(6-15 Year s)
(3- 6 Year s)
LDIP
INVESTM ENT
PR OGR AM M ING
ANNUAL BUDGET
BUDGETING
AND
BUDGET (1 Year)
SUPPLEMENTAL
BUDGET
22
3.5 Policy Guides on a PlanBudget Linkage
23
Table 2. SYNCHRONIZED LOCAL PLANNING-BUDGETING
CALENDAR
PERIOD
ACTIVITY OUTPUT/S ACTOR/S
COVERED
January (First PPDC sets guidelines for data Guidelines for PPDCs
Week) gathering data
Gathering
January to Updating of planning and Update planning, LPDCs, budget
March budgeting Budgeting and Officers,
Database (socioeconomic, Financial database Treasurers,
physical resources, time series Department
revenue and expenditure data, Heads, NGAs/
project profiles/ status, among RLAs
others)
April-May Analysis of planning Draft situational LPDCs, NGAs/
environment for plan analysis and RLAs
preparation/review/updating assessment of plan
implementation
April to May Updating of appropriate AIP Indicative AIP LDCs, LPDCs
in the LDIP as input to (the first year of
budgeting the LDIP in the
case of election
year)
Not later than Approval of the AIP AIP for the Budget Year
Sanggunian
First Week of
August
PDPFP/CDP Preparation
24
PERIOD
ACTIVITY OUTPUT/S ACTOR/S
COVERED
Harmonization and Harmonized Jointly by the
complementation of vision, goals and province and
development vision, goals, strategic direction component
strategic direction between LGUs
and among province and
component
cities/municipalities
June to July 1-31 Identification of areas for Joint programs/ Provinces and
during election complementation of PPAs projects their component
year between and among cities and
provinces and their municipalities,
component NGAs/RLAs
cities/municipalities
25
PERIOD
ACTIVITY OUTPUT/S ACTOR/S
COVERED
Preparation and submission Budget Proposals Local department
of budget proposals heads
July 16 August Conduct to technical budget Reviewed budget LFCs and LCEs
31 hearings on budget proposals proposals
submitted by Department
Heads
Not later than Preparation of the Budget Budget Message LCEs (Provinces,
October 16 Message and Submission of and Executive Cities,
Executive Budget to the Budget Municipalities)
Sanggunian
26
PERIOD
ACTIVITY OUTPUT/S ACTOR/S
COVERED
27
4.0 The Plan-Budget Cycle
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.
28
DEVELOPMENT
PLANNING
(6-15 years)
INVESTMENT
BUDGET PROGRAMMING
ACCOUNTABILITY (3-5 years)
CURRENT
YEAR
BUDGET (Jan.-June)
YEAR
(Jan.-Dec.)
AIP
BUDGET
(1 year)
EXECUTION
CURRENT
YEAR
(July-Dec.)
BUDGET BUDGET
REVIEW PREPARATION
BUDGET
AUTHORIZATION
ION
cull out the current slice of the LDIP as input and annual
component of the Capital Expenditure (CapEx) into the
AIP Summary Form;
29
determine resource requirements of PPAs for basic
services delivery; and
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.
30
LDC Local Chief Executive (LCE) / Local Sanggunian
PPDO/CPDO/MPDO/LBO Local Development Council (LDC
Aligns Development
Plan/ELA (PDPFP/CDP)
with Current
Development Issues
Updates AIP
to consider new
and
unimplemented PPAs
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
31
5.3 Guidelines on AIP Preparation
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
32
Cultural/Conference/Convention Center
Operation Services
Health
Health Services
Field Projects (Immigration, Inoculation,
Blood Donor Services)
Day Care Clinic
Hospital Services
Chest Clinic
Social Welfare
Social Welfare Services
Family Planning Services
Miscellaneous and Other Social Services
Agricultural Services
Veterinary Services
Natural Resources Services
Architectural Services
Engineering Services
Economic Enterprises and Public Utilities
Operation Services
Tourism Services
33
5.3.2 The AIP Summary Form
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
Illustrative Example:
1000 1 1
Project/Activity - - Tax Mapping
Program - - - - - - - Real Property
Tax Administration
Sector - - - - - - - - General Public Services
34
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.
Examples:
35
at least two (2) Performance Indicators that will serve as
measures of change or development over the years. For
example:
36
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.
Annex A
Summary Form
Economic Services
(80)
Social Services
(30)
37
6.1 What is a PPA Structure?
38
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
39
6.3 Review of Existing PPA Structure
ANALYZE POLICY
RESULTS/ OBJECT IVES ST AT US
OUT PUTS QUO
OF PPAs Relevant to or If YES
YES / NO
Consistent with
If NO
DETERMINE REDESIGN
CAUSE/S PROGRAM
ST RUCT URE
40
Step 2. Design the proper organization structure that will best
carry out the program objectives.
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.
41
7.0 Reforms in Local Government Budgeting
42
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.
Formulation of MFOs
Identification of PPAs
43
ANALYTICAL FRAMEWORK
OF OPIF
WHY?
SECTORAL GOALS
OUTCOME
ORGANIZATIONAL OUTCOME
PERFORMANCE
INDICATORS
WHAT?
OUTPUTS MAJOR FINAL OUTPUT
WHO?
STRATEGIES PPAs
HOW?
INPUTS BUDGET TARGETS
44
Other attributes integrated into the measures include:
45
.
7.1.9 Sample illustration of a department/office logframe.
Logical Framework (Agriculture Office)
46
PART II. THE LOCAL BUDGET PROCESS
47
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.
BUDGET
PREPARATION
BUDGET BUDGET
ACCOUNTABILITY AUTHORIZATION
BUDGET BUDGET
EXECUTION REVIEW
48
Chapter 1. Budget Preparation Phase
1.0 Introduction
49
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
50
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.
The local chief executive shall prepare the executive budget for the
ensuing fiscal year (Section 318, R.A. No. 7160).
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 16th of October of the current fiscal year (Section 318, R.A. No.
7160).
51
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.
3.6 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).
52
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
15th 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.
The budget preparation flow chart below (Figure 10) shows the sequence
of activities in preparing the executive budget for the budget year.
INDICATIVE OFFICIALS
ACTIVITY SCHEDULE RESPONSIBLE
START ISSUE
THE BUDGET CALL June 5 LCE
CONDUCT LCE/LFC
July 5 Department
BUDGET FORUM Heads
PREPARE
AND SUBMIT BUDGET Department
July 15 Heads
PROPOSALS
CONDUCT BUDGET
HEARING August 15 LCE/LFC
PREPARE LCE/LFC
September 30
THE LEP
SUBMIT EXECUTIVE
BUDGET TO THE October 16 LCE
END SANGGUNIAN
Figure 10. The Budget Preparation Flow Chart
53
5.0 Steps in the Budget Preparation Phase
The Budget Call signals the start of the budget preparation phase. This
executive directive is prepared based on the approved AIP.
Budget Proposals are reviewed as to their consistency with the AIP and
the 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:
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.
54
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.
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:
55
2.1 Determine Expected Outputs 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.
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.
56
Step 3. Conduct Budget Hearings and Evaluate Budget Proposals
The hearing and evaluation of budget proposals shall follow these sub-
steps:
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.
Legal Basis
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.
57
Receipts sources These are generated from LBP Form
Nos. 1 and 2.
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:
58
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).
59
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.
4.4 The fourth part of the LEP, the General Provisions, includes
guidelines on receipts, income and expenditure policies.
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.
60
Step 5. Prepare the Budget Message and Budget of Expenditures
and Sources of Financing
Legal Basis
61
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.
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.
62
timeliness criteria. Relate the funding to the issues being
resolved by the proposed spending policies.
Legal Basis
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;
63
What is the BESF?
Step 6. Submit Executive Budget to the Sanggunian not later than the
16th of October of the current year (Section 318, R.A. No. 7160).
BESF Tables
64
(In 000 Pesos)
Account Past Current Year Budget
Particulars Code Year Year Total
(Actual)
(Actual) (Estimate) Total (Estimate)
(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
III. Expenditures
1.0 Current Operating Expenditures
65
Training and Scholarship
Expenses
______________________
______________________
Total Expenditures
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.
66
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
TOTAL
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.
67
BESF Table No. 3
Other Services
______________
______________
TOTAL
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.
68
BESF Table No. 4
STAFFING SUMMARY
3. Administrative Positions
1. Contractual
2. Casual/Emergency
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.
69
BESF Table No. 5
Basis of Computed
Particulars
Computation Amount
(1) (2) (3)
2. Budgetary Requirements
2.1 20% of IRA for Development Fund IRA for the budget
Year X 20%
2.2 5% Calamity Fund Regular income for
BY X 5%
2.3 Financial Assistance to Barangays (P1,000 No. of barangays in
minimum aid) a particular LGU X
P1000
TOTAL
INSTRUCTIONS
Data for this form shall be taken from LBP Form No. 7.
70
AND INDEBTEDNESS
(In 000 Pesos)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
TOTAL
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
71
STATEMENT OF RECEIPTS
__________________________
Province/City/Municipality
General Fund
Amounts
Account Income Current Budget
Particulars Code Classification Past Year
(Actual)
Year Year
(Estimate) (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
72
We hereby certify that the foregoing estimated receipts are reasonably projected as collectible for
the Budget Year.
Approved by:
______________________
LOCAL CHIEF EXECUTIVE
INSTRUCTIONS
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.
A separate LBP Form No. 1 shall be prepared for each local economic
enterprise/public utility.
73
STATEMENT OF RECEIPTS AND EXPENDITURES
__________________________
Province/City/Municipality
General Fund
CURRENT YEAR
Account Past Year APPROPRIATION
Particulars Code First Second
(Actual)
Semester Semester TOTAL
(Actual) (Estimate)
(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 )
74
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:
Approved:
________________________
LOCAL CHIEF EXECUTIVE
INSTRUCTIONS
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.
Prepare the same form for each local economic enterprise/public utility.
75
LBP Form No. 3
Total Appropriations
76
PROGRAMMED APPROPRIATION AND OBLIGATION BY OBJECT OF
EXPENDITURE
INSTRUCTIONS
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.
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.
77
LBP Form No. 3A
Total Appropriations
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
78
LBP Form No. 4
PERSONNEL SCHEDULE
Budget Year : ______________
Province/City/Municipality: ___________________
OFFICE:
Prepared: Reviewed:
_________________________________ __________________
Human Resource Management Officer Local Budget Officer
Approved:
___________________
Local Chief Executive
INSTRUCTIONS
Prepare the same form for each local economic enterprise/public utility.
79
LBP Form No. 5
I. FUNCTIONAL STATEMENTS
_____________________________________________________________________
_____________________________________________________________________
II. OBJECTIVES
_____________________________________________________________________
III. PROGRAMS/PROJECTS/ACTIVITIES
Performance/ Implementation
Reference Program/Project /Activity Cost Output
Annual Schedule
Code Description (000) Targets
Indicator FROM TO
(1) (2) (3) (4) (5) (6) (7)
INSTRUCTIONS
Summarize briefly the function of the Department/Office in outline or capsulized statement. The mandate
of the office should be clearly described.
80
LBP Form No. 6
FUND/SPECIAL ACCOUNT:
Previous Payments Amount Due Balance
Date Principal
Creditor
Contracted
Term
Amount
Made (Budget Year) of the
Principal Interest Total Principal Interest Total Principal
(1) (2) (3) (4) (5) (6) (7)
TOTAL
Certified Correct: Noted:
________________ ___________________
Local Accountant Local Chief Executive
INSTRUCTIONS
81
LBP Form No. 7
TOTAL
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.
82
LBP Form No. 8
FUND/SPECIAL ACCOUNT:
General Other
Account Social Economic TOT
Particulars Code
Public Servic
Services Services AL
Services es
(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
83
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
84
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).
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.
85
LBP Form No. 9
___________________________
Fund/Special Account
Account
Particulars Amount
Classification
(1) (2) (3)
1.0 New Revenue Sources
Tax Revenue
Loan Proceeds (Borrowings)
2.0 Savings
3.0 Realignment/Reversion
Certified Correct:
___________________ ___________________
Local Treasurer Local Accountant *
_____________ _____________
Date Date
86
LBP Form No. 10
Prepared: Approved:
______________________ ______________________
Local Budget Officer Local Chief Executive
INSTRUCTIONS
87
7.0 Illustrative Example of a Budget Call
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.
1. Consistent with the approved AIP, the LGU shall focus its resources to the attainment of
the following general objectives:
1.2 To provide accessibility in the delivery of basic services to all constituents of the
LGU; and
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.
88
4. The allocation scheme of the net amount available for appropriation for FY 2009 shall be
based on the following priority:
The receipts estimates for FY 2009 are to be generated from the following sources:
% ages to
Sources of Financing Amount
Total
IRA 103,841 90.00%
1,143 1.00%
National Wealth 3,516 3.50%
3,151 2.80%
Local Tax Revenues 3,100 2.70%
Operating and Misc. Income
Borrowings - -
Others (Grants and Sale of Fixed
Assets)
114,751 100.00%
89
B. Social Services Sector
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
90
2. The Budget Preparation forms to be submitted together with other documents are:
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.
91
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.
Official Seal
Municipality/City/Province of ___________________________
92
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)
93
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
A. Functional Statement
1. Exercise general supervision and control over all programs, projects and
activities of the municipal government.
94
2. Enforce all laws and ordinances pertinent to the effective governance of the
municipality.
B. Objectives
C. Projects/Activities (000)
AIP Implementation
CODE Activities/Projects Cost Output Indicator Target Schedule
REF. From To
10.1 1. General Administrative and 3,200 Policy guidelines
Support services formulated 10 1/1/2009 12/31/2009
Projects implemented 20 1/1/2009 12/31/2009
10.1.1 2. Extension services in 1,500 Training Conducted
Planning and Budgeting 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 1,000 Punong Barangays
All Barangays trained 16 1/1/2009 12/31/2009
10.1.4 5. Rehabilitation of El Nido 800 El Nido Bridge
Bridge in Barangay San Rehabilitated
Isidro 1 4/15/2009 8/15/2009
TOTAL 8,100
95
For general administration and support service, Office of the Mayor, extension
offices, public assistance services, and implementation of locally-funded
projects.P8,100,000
96
Training and Scholarship Expenses 767 50 100 15
Telephone Expenses - Landline 773
Telephone Expenses - Mobile 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
Current Year Budget Year
Ordinance Authorized Proposed
/Item Position Name of Rate/Annum Rate/Annum Increase/
Title Incumbent Decrease
Number Grade/ Grade/
Amount Amount
Step Step
(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:
97
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
98
9.0 Illustrative Example of a Budget Message
BUDGET MESSAGE
___(Date)___
Gentlemen:
A. INTRODUCTION
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
99
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.
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
EXPENDITURE PROGRAM
(Distribution by Sector)
Health, Nutrition, Population
P37.3M
Budget Year Soc. Sec. And Welfare 0.7
1%
1%
34%
Exhibit 2
3%1%
100
B. GOALS AND OBJECTIVES
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. FISCAL POLICIES
Exhibit 4
36 37.3 37.2
35.1
40
31.5 30.2
35 29
26.3
30
21.3
25
20
15 9.5
5.5
10 3.2 4.6
2.4 2.48 2.4
0.8 0.8 0.8
5
0
GPS HNPC ESR RC DS RSS AB
101
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
Support to FLS
3.4
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).
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.
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,
102
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.
CONCLUSION
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).
______________________________________
PROVINCIAL GOVERNOR/CITY MAYOR/
MUNICIPAL MAYOR
103
In evaluating the targets for the budget year the following guide questions are
suggested:
104
B. Asset-based service area
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:
25% 25%
100% 75% 55%
SERVICE GAP 20% SERVICE GAP
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.
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.
105
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.
For example:
What is the cost per capita in providing primary health care services at
the municipal level?
Assume that:
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.
106
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.
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.
What are variable costs? These are current operating costs that vary or
change proportionately with the increase or decrease in output.
107
For example given the following data:
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.
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:
Fixed Cost
P500,000
Output/unit
If the budget ceiling is limited to P700,000 then the total cost is:
108
Total Cost (00,000)
Output/unit
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.
109
Chapter 2. Budget Authorization
1.0 Introduction
110
Step 3. Submit the Appropriation Ordinance for Review
111
Budget Authorization Phase
1.0 Introduction
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).
112
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.
3.5 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).
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.
113
Local Chief Local Finance Heads of
Sanggunian Departments
Executive Committee
and Offices
Justifies their
Presents the Conducts a preliminary
budget
Executive review and evaluation
of the executive budget. proposals
Budget
[Committee on
Appropriations/Finance] Assists the
Sanggunian in the
analysis and review
of the annual and
Deliberates on the supplemental budgets
budget
Forwards the
Appropriation
Ordinance to the LCE
[Secretary to the
Sanggunian]
114
5.0 Steps in the Budget Authorization Phase
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.
Document Signatory
LFC
BESF
LCE
115
1.1.2 For Supplemental Budget
(Please refer to LBA Form No. 1B on page 132)
Document Signatory
116
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.
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).
117
The Expenditures Portion of BESF Table No.1
Deliberation Proper
118
The LFC, in assisting the Sanggunian, shall:
119
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?
120
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).
BESF
AIP
Personnel Schedule by department/office/unit (LBP Form
No. 4 on page 79)
Others
121
dated 12 April 1993) and Article 454 of the IRR of the same
R.A.
122
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).
123
Failure to Enact the Annual Appropriations (Section 323, R.A.
No. 7160)
124
concerned shall then be the basis for disbursements (Section
323, 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.
125
Override of the Veto (Section 55 [c], R.A. No. 7160; Article 109 [c],
IRR of R.A. No. 7160)
Such override will make the ordinance effective for all legal intents
and purposes even without the approval of the LCE.
126
6.0 Changes in the Annual Budget
General Rule
Exceptions
127
6.1.2 If covered by new revenue source/s
128
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 ordinance enacting the annual budget shall take effect at the
beginning of the ensuing calendar year (Section 320, R.A. No. 7160).
129
Posting requirement and effectivity of Appropriation Ordinance
(Section 59, R.A. No. 7160; Article 113, IRR of R.A. No. 7160).
130
8.0 LOCAL BUDGET AUTHORIZATION FORMS
Document Signatory
131
LBA Form No. 1B
Document Signatory
132
9.0 Illustrative Example
Introduced by:
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
133
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 _____________.
x--------------------------------------------x
I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.
APPROVED:
134
10.0 Sample Formats
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:
Total P___________
135
Proposed New Appropriations Language
Current Operating
Expenditures
Maintenance Capital Financial
Total
Personal and Other Outlay Expenses
Program/Project/Activity Services 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
136
Program Appropriation and Obligation by Object (000)
Account Current
Object of Expenditure Past Year Budget Year
Code* Year
Total PS
Total MOOE
Total CO
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.
137
Section 5. Effectivity. The provisions of this Ordinance shall take effect on
_________________.
x--------------------------------------------x
I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.
APPROVED:
138
10.2 Sample Format No. 2 Approval Letter of the LCE
Date
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.
139
10.3 Veto Message Format
Date
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.
140
10.3.2 Sample Format No. 4 Total Veto
Date
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.
141
10.4 Sample Format No. 5 Ordinance Authorizing Use of Savings
and Augmentation
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.
x--------------------------------------------x
142
I HEREBY CERTIFY
THAT THIS IS A TRUE AND ACCURATE COPY
OF THE ORDINANCE DULY ENACTED
BY THE SANGGUNIAN ON ___________________.
APPROVED:
(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)
143
Chapter 3. Budget Review Phase
1.0 Introduction
144
8.0 Illustrative Example Table Recapitulating the Findings
and Possible Review Actions
145
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.
146
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).
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.
147
Secretary Local Chief
Reviewing Authority Sanggunian
to the Executive
Sanggunian
Approves the
Checks the Appro-priation
Submits the Ordinance
Appropriation Appropriation
Ordinance Ordinance and
budgetary
requirements
Prepares LBR
Form Nos. 1A and
1B
Reviews the
Appropriation
Ordinance
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
148
6.0 Steps in the Budget Review Phase
1.1.1 For Annual Budget (Please refer to LBR Form No. 1A)
Document Signatory
149
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 Local Treasurer
Income
Certification of Savings
Local Treasurer
and Local
Accountant
New Revenue Measures:
Certified Statement of Income from New Local Treasurer
Revenue Measures and Local
Copy of duly enacted Tax Ordinance Accountant
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
Realignment of Appropriations in Times of
Public Calamity Local Treasurer
Certificate of Source of Funds Available for Local Accountant
Appropriations LCE
Veto message, if any LCE
Sanggunians action on veto, if any Secretary to the
Sanggunian
Presiding Officer
150
Incomplete Submission
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:
2.4 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).
151
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).
2.8 Check if there are items in the Appropriation Ordinance that are
specifically prohibited by law.
152
The Appropriation Ordinance shall be declared operative in
its entirety but subject to conditions in the following cases:
153
securities, notes and other obligations issued (Section
303, R.A. No. 7160)
154
inoperative, disallowed, or reduced (Section 327, R.A. No.
7160).
3.4.1 The review action does not amend the act of the Sanggunian
as embodied in the Appropriation Ordinance.
155
The condition requiring provision for deficiencies shall
be acted upon in the next supplemental budget.
156
3.8 Review Actions and Corrective Measures
For items without legal The LGU, through the Treasurer, shall
basis. not make further disbursements of
funds from any of the items of
For items in excess of appropriation declared inoperative,
budgetary requirement disallowed or reduced and the LCE
and general limitations. shall notify the reviewing authority of
such action.
For items that are in
excess of the amount
prescribed by law
157
7.0 LOCAL BUDGET REVIEW FORMS
_____________ _____________
Date Received Deadline
_________________________________________ _____
Local Government Unit Class
_________________________________ _______________________
Title General Fund
_______________________
Reviewing Officer
158
LBR Form No. 1B
_______________________
Reviewing Officer
159
LBR Form No. 2
An illustrative example of LBR Form No. 2 with entries on findings and possible
review actions is shown on page 161.
160
1.0 Illustrative Example
161
9.0 Sample Formats
____________________
Date
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.
By Authority of the
Secretary of Budget and Management:
______________________
Director IV
162
9.2 Sample Format No. 2 - Review Letter Declaring the Appropriation
Ordinance Operative in its Entirety Subject to Some Conditions
____________________
Date
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.
By Authority of the
Secretary of Budget and Management:
_______________________
Director IV
163
9.3 Sample Format No. 3 - Review Letter Declaring the Appropriation
Ordinance Inoperative in its Entirety
____________________
Date
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.
By Authority of the
Secretary of Budget and Management:
__________________________
Director IV
164
9.4 Sample Format No. 4 - Review Letter Declaring the Appropriation
Ordinance Inoperative in Part
____________________
Date
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.
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.
By Authority of the
Secretary of Budget and Management:
_________________________
Director IV
165
9.5 Sample Format No. 5 Resolution Declaring the Appropriation
Ordinance Operative in its Entirety
WHEREAS, the subject Appropriation Ordinance shows substantial compliance with the
same law and its Implementing Rules and Regulations;
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.
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
166
9.6 Sample Format No. 6 - Resolution Declaring the Appropriation
Ordinance Operative in its Entirety Subject to Some Conditions
WHEREAS, subject Appropriation Ordinance reveals substantial compliance with the same law
and its Implementing Rules and Regulations except for the following:
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.
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
9.7 Sample Format No. 7 Resolution Declaring the Appropriation
Ordinance Inoperative in its Entirety
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.
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
9.8 Sample Format No. 8 - Resolution Declaring the Appropriation
Ordinance Inoperative in Part
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.
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.
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
9.9 Sample Format No. 9 Stamp of Review
A.
REVIEWED
PURSUANT TO THE PROVISIONS OF REPUBLIC ACT NO. 7160
______________________________
DIRECTOR IV
B.
Seal of
the
Province REVIEWED
PURSUANT TO THE PROVISIONS OF REPUBLIC ACT NO. 7160
______________________ ____________________
(Authorized Signatory/ies per the Internal Rules of Procedures)
170
Chapter 4. Budget Execution Phase
1.0 Introduction
171
Budget Execution Phase
1.0 Introduction
172
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).
3.1 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).
3.3 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).
173
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).
174
4.0 The Budget Execution Flow Chart
175
6.0 Steps in the Budget Execution Phase
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):
176
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:
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.
177
2.5 Include the following budgetary items in the LBM:
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:
178
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.
179
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.
180
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.
181
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.
182
Step 4. Obligate and Disburse Funds
Obligations already incurred but not yet paid (accounts payable) shall be
settled in accordance with existing budgeting, accounting and auditing
rules and regulations.
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.
6.1 Compare the actual performance in both the financial and physical
accomplishments vis--vis the targets for the quarter.
183
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.
184
6.10 The Financial and Physical Performance Targets of each
department/office aim to:
The LPDC and the LBO are tasked to monitor and evaluate the
physical and financial performances of all PPAs of line
departments, respectively.
185
7.0 Local Budget Execution Forms
ALLOTMENT
RELEASE
ORDER (ARO)
DETAILED
FINANCIAL
AND PHYSICAL
PERFORMANCE
TARGETS
( DFPPT)
CASH
RECEIPTS
STATEMENT
FORECAST
OF
(CRF)
CASH FLOW
FORECAST
FORM CASH
PRESCRIBED DISBURSEMENTS
BY BLGF FORECAST
(CDF)
CASH FLOW
ANALYSIS
(CFA)
186
LBE Form No. 1
a.
b.
c.
d.
TOTAL
___________________ ___________________
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 functional 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.
187
LBE Form No. 2
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 E xecutive
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.
188
LBE Form No. 3
LGU : _____________________________
Department/Office: _____________________________
MFO : _____________________________
_________________________ _________________________
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.
189
LBE Form No. 3A
LGU : _____________________________
Department/Office: _____________________________
MFO : _____________________________
_________________________ _________________________
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).
190
Chapter 5. Budget Accountability Phase
1.0 Introduction
Accounting for the Budget
Audit of Accounts
191
Budget Accountability Phase
1.0 Introduction
192
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.
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).
193
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).
Collect all local taxes, fees, and charges (Section 170, 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);
194
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).
195
Prepare and submit periodic reports to the LCE through the
LFC and to the DBM in such forms prescribed under this
Manual.
196
4.0 The Budget Accountability Flow Chart
Monitoring Performance
of Outputs/ Evaluation
Results (outputs vs.
of PPAs targets)
Results
Constituents
The chart above summarizes the role of the budget accountability phase
in the planning/programming and budgeting cycle, as follows:
Accounting for the local budget involves two steps: (1) monitoring and
(2) performance evaluation.
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.
197
Expenditures are tracked and monitored vis--vis the outputs and
accomplishments.
198
1.2.2 Monitoring of Appropriations, Allotments and Obligations
199
Step 2. Evaluate Performance of Each Department/Office
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 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:
200
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.
201
2.2 Follow Guidelines/Procedures in Evaluating Department/
Office Performance
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%.
202
Physical Financial
Rate of
Adj. Adj.
Accomplishments Points Points
Rate Rate
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
203
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.
204
2.3.5 Prepare the Performance Review Report (PRR).
Executive Summary
B. Background
C. Summary of Findings
D. Recommendations
205
6.0 LOCAL BUDGET ACCOUNTABILITY FORMS
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 Office r on or before the 20th
day of the month following the quarter reported.
206
LBAc Form No. 2
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.
207
LBAc Form No. 3
Department/Office: __________________
Target Output Actual Performance Variance
MFO/ Major Final Performance
Previous This Previous This
PPA Output Indicator Quarters Quarter
Total
Quarters Quarter
Total Output % Remarks
(1)
(2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Prepared by:
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.
208
LBAc Form No. 4
Province/City/Municipality: ______________
209
Continuation of LBAc Form No. 4
III. Expenditures
A. General Services
B. Social Services
C. Economic Services
D. Other Services
Total Expenditures
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.
210
7.0 LOCAL BUDGET PERFORMANCE EVALUATION FORMS
Office/Department: __________
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.
211
LBPE Form No. 2
Department/Office:__________________
MFO/ Actual
% Allotment Obligations
Absorptive Weighted
Variance Points
Activity Weight Released Capacity Score
Incurred
(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.
212
8.0 ILLUSTRATIVE PRESENTATION:
Financial Accomplishment
Physical Accomplishment
213
PART III: ALLOCATIONS TO LOCAL
GOVERNMENT UNITS (ALGU)
214
ALLOCATIONS TO LOCAL GOVERNMENT UNITS (ALGU)
215
1.0 Internal Revenue Allotment (IRA)
1.1 Introduction
Legal Basis
Income tax
Estate tax and donors tax
Value-added tax
Other percentage taxes
Taxes imposed by special laws, such as travel tax.
216
Provinces - Twenty-three percent (23%)
Cities - Twenty-three percent (23%)
Municipalities - Thirty-four percent (34%)
Barangays - Twenty percent (20%)
20%
23%
Barangays
Provinces
34% 23%
Municipalities Cities
25%
Land Area
50%
Population
25%
Equal Sharing
217
National Statistics Office (NSO) every 10 years as contained in a
Presidential Proclamation Order.
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.
218
Construction or rehabilitation of a local government-
owned potable water supply system
Implementation of a livelihood/entrepreneurship
development program or project
219
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
220
2.0 Special Shares
Legal Basis
There are four (4) types of national wealth with the responsible
collecting agency indicated:
221
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:
20%
35% Province
Barangay
45%
Component City or
Municipality
35%
Barangay
65%
City
222
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%).
223
2.1.4 Fund Release Procedures
224
Energy Resources Production
225
2.2 Share in the Gross Income Taxes Paid by All Businesses and
Enterprises within the Ecozones
Legal Basis
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:
Population 50%
Land Area 25%
Equal Sharing 25%
100%
226
2.2.3 Fund Release Procedures
227
2.3 Share in Value Added Tax
Legal Basis
228
Formula for the Distribution of LGUs share
in the Incremental Collection from VAT
30% to the
city/municipality
where the principal
If VAT is paid by office is located
manufacturers, producers,
exporters where the
42% to the
plantation is located at a
city/municipality where
place other than the place
the factory is located
where the factory is located
28% to the
city/municipality where
the plantation is located
30% to the
city/municipality
where the principal
If VAT is paid by the office is located
manufacturers, producers,
exporters and has two (2) or
more factories, plants and 70% shall be prorated
plantations among the localities
where the factories,
project offices, plants
and plantations are
located
229
Based on the foregoing formula, the BIR prepares a certification of
the computed LGU share from VAT tax payments/collections and
submits to DBM.
230
2.4. 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.
50% 30%
divided equally
Province
40%
Municipalities
50%
30%
Municipalities and Cities
divided
according to within the district as
volume identified by their
respective Figure 24. Distribution of
legislators Shares of LGUs from the
tobacco excise tax
231
2.4.3 Use of the Fund
232
PART IV. FREQUENTLY-ASKED QUESTIONS
ON LOCAL GOVERNMENT
BUDGETING
233
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
234
A. Budget Preparation,
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.
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.
235
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.
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)?
236
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).
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).
237
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.
238
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?
Where should the From the LCE or the From the LCE only
proposal emanate? Sanggunian
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.
239
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.
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.
240
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.
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).
241
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.
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).
242
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).
243
Further, Section 49 provides that the temporary Presiding Officer
shall certify within 10 days from the passage of the ordinance.
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.
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.
244
as basis for the AB or not taken into account during the preparation
and enactment of the AB.
245
The Appropriation Ordinance may not need the signature of everyone
in the Sanggunian, as long as the ordinance was duly enacted.
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
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).
246
C. Budget Review
1. Should an ordinance authorizing supplemental appropriations
(supplemental budget) submitted after the fiscal year be
reviewed?
2. May the provision for lump-sum before its legal basis is issued,
like salary adjustments, be allowed in budget review?
247
the preceding year (AB and SB) shall be deemed reenacted (Section
323, 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.
248
5. What will be the review findings if new items are included by the
Sanggunian over those provided in the proposed executive
budget?
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.
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.
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.
249
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
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;
250
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. Confidential/Intelligence Expenses
251
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.
3. What are the guidelines in the allocation and use of public funds
for confidential/intelligence expenses?
252
For example:
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.
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.
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
253
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:
3. Educational research;
254
5. Expenses for school sports activities of the
national, regional, division, district, municipal and
barangay levels, including DepEd-related activities
including co-curricular activities.
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).
255
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).
b. Budget Authorization
256
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.
d. Budget Accountability
257
SEF Budget Preparation Form No. 1
Maintenance
Personal and Other Capital
Rank Program/Project/Activity* Total
Services Operating Outlays
Expenses
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)
258
SEF Budget Authorization Form No. 01
Provincial/City/Municipality of ___________
Local School Board of ____________
Province/City/Municipality
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:
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 ____:
259
Expenditure Program for Budget Year
Maintenance and
Personal Capital
Rank Program/Project/Activity* Other Operating Total
Services Outlays
Expenses
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
Section 3. Effectivity. This Resolution shall take effect immediately upon its approval.
Carried Unanimously,
Names Signatures
___________________ ___________________
___________________ ___________________
___________________ ___________________
__________________________
Secretary-Designate to the LSB
Attested:
______________________
Co-Chairman, LSB
APPROVED:
_________________________
LCE, Chairman, LSB
Date: ____________
260
SEF Budget Accountability Form No. 1
Province/City/Municipality ______________
Personal Services
__________________________________ __________
__________________________________ __________
__________________________________ __________
Capital Outlays
__________________________________ __________
__________________________________ __________
__________________________________ __________
Financial Expenses
__________________________________ __________
__________________________________ __________
__________________________________ __________
Sub-total __________
Balance P
=========
Prepared by:
_____________________________
Local Accountant
Approved by:
____________________________
LCE, Chairman, LSB
261
G. Calamity Fund
1. What is a Calamity?
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:
262
calamity, as determined and declared by the local Sanggunian
concerned;
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.
b. Financial assistance and other services for medical, rescue and relief
workers who have been tasked to attend to the victims; and
263
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.
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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."
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country to be under the state of national calamity, which
needs to be prevented and suppressed. (emphasis supplied)
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.
Under R.A. No. 7160, all issues affecting land area falls under the
function of the LMB-Department of Natural Resources (DENR). For
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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.
I. 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;
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.
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5th year of program implementation 60% 40%
6th year and onwards 50% 50%
1. What is GAD?
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.
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that must be implemented for women in relation to those stipulated in
R.A. No. 7160.
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.
A GAD Budget is the total amount provided in the General Fund Budget
of the LGU to finance the PPAs in the GAD Plan.
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Accordingly, the GAD budget must not be interpreted as an
additional and separate fund that will be provided by the national or
local government.
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.
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7. How are the GAD Plan and Budget reported and monitored?
1. What are the legal bases for providing a budget for senior citizens
and the differently-abled?
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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.
3.0 Coverage
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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.
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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;
x x x
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.
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LGU A (4th Class Municipality) Budget Year 2008
c. The second step is to determine the total PS cost that provides for the
following priorities:
Authorized allowances/benefits
(including Magna Carta Benefits of Public Health
Workers [PHWs])
Waived items
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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
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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).
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.
1. What are the legal bases for the establishment and development of
Local Economic Enterprises and Public Utilities?
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SEC. 22. Corporate Powers. x x x
x x x
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or services for a specific market or client group which may include,
but are not limited to:
The rationale and criteria for the establishment and operation of local
economic enterprises and public utilities are:
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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.
The determination of the rates to be charged as user fees shall use the
criteria of affordability, economic viability, and social responsibility.
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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.
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:
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Any excess shall form part of the General Fund of the LGU
concerned.
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REFERENCES
12. The 1991 Local Government Code or Republic Act (R.A.) no. 7160 and
its Implementing Rules and Regulations.
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