POFFICIALS gf RELEASE 4 REPUBLIC OF THE PHILIPPINES Department of Budget and Management Boncodin Hall, General Solano Street, San Miguel, Manila LOCAL BUDGET CIRCULAR To : All Provincial Governors, City/Municipal Chairpersons; Provincial/City/Municipal/ Barangay Sang- gunian Members; Provincial/City/Municipal Treasurers, Budget Officers, and Auditors; and Other Officials Concerned No. 98 October 14, 2011 layors, and Barangay SUBJECT : Guidelines in Determining Compliance to the Personal Services (PS) Limitation on Local Government Budgets 1.0 Background 1.1 To ensure that local government units (LGUs) operate within budgetary constraints and that adequate funds are allocated for the delivery of basic services and development projects, Republic Act (R.A.) No. 7160, “Local Government Code of 1991,” hereinafter referred to as the Code, limits the PS appropriation. 1.1.1 Section 325(a) thereof provides that the total PS appropriation for one (1) fiscal year for an LGU shall not exceed 45% in the case of 1st to 3rd class provinces, cities, and municipalities, and 55% in the case of 4th class to 6th class provinces, cities, and municipalities, of the total annual income from regular sources realized in the next preceding fiscal year. 1.1.2 Section 331(b) thereof provides that the total PS appropriation for one (1) fiscal year for a barangay shall not exceed 55% of the total annual income actually realized from local sources during the next preceding fiscal year. 1.2 Item (7) of the Senate and House of Representatives Joint Resolution No. 4, s. 2009, approved on June 17, 2009, highlights the authority of the sanggunian to determine the salaries, wages, allowances, other emoluments, and benefits of LGU personnel pursuant to the Code, subject to the PS limitation. 1.3 Section 89 of the General Provisions of R.A. No. 10147, the FY 2011 General Appropriations Act (GAA), provides only four (4) waivers to the PS limitation unlike in previous GAAs.2.0 Purpose This Circular is issued to provide the guidelines in determining compliance to the PS limitation on LGU budgets as prescribed in the Code. 3.0 Coverage and Exclusions o at Biz) Coverage This Circular covers the annual and supplemental PS budgets of existing provincial/city/municipal/ barangay governments. Exclusions This Circular does not cover the following PS budgets: 3.2.1, PS budgets of new LGUs which shall be covered by separate guidelines; 3.2.2 PS budgets of public utilities and economic enterprises owned, operated, and maintained by LGUs; and 3.2.3 PS budgets under the Special Education Fund of LGUs. 4.0 Definition of Terms 41 Personal Services Budget - This collectively refers to all budgetary items intended for the payment of salaries, wages, step increments, and other ‘compensation of permanent, temporary, contractual, and casual employees of LGus. 4.1.1 Other compensation consists of the following: 4.1.1.1 Authorized Allowances/Benefits Personnel Economic Relief Allowance Uniform/Clothing Allowance Representation and Transportation Allowances Year-End Bonus and Cash Gift Magna Carta Benefits of Public Health Workers Magna Carta Benefits of Public Social Workers Monetization of Leave Credits Other legally authorized allowances/benefits 4.1.1.2. Fixed Personnel Expenditures ECC Contributions PHILHEALTH Contributions PAG-L.B.1.G. Contributions Retirement and Life Insurance Contributions.4.2 43 4.1.13 Other Personnel Benefits Retirement Gratuity Terminal Leave Benefits 4.1.2 The following are not PS items, hence, these shall be provided under Maintenance and Other Operating Expenses or Capital Outlay in LGU budgets, as the case may be: 4.1.2.1 Honoraria or additional allowances and other benefits provided to national government officials stationed in or assigned to a municipality, city, or province, when its finances allow, pursuant to the pertinent provisions of the Code; 4.1.2.2 Expenses for professional services, e.g., consultancy services, security services, janitorial services, etc.; and 4.1.2.3 Labor cost of projects, Personal Services Limitation — This is the prohibition under Sections 325(a) and 331(b) of the Code against appropriating funds for PS in excess of the limits set therein (for reasons indicated in item 1.1 of this Circular). It also refers to the amount beyond which no additional appropriation for PS items is allowed. For a province, city, or municipality, the PS limitation is the amount equal to 45% of the total annual income from regular sources realized in the next preceding fiscal year for 1st to 3rd income class LGUs or 55% for lower income class LGUs. For a barangay, the PS limitation is the amount equal to 55% of the total annual income actually realized from local sources during the next preceding fiscal year. Waived Items - These are PS items in which favor Sections 325(a) and 331(b) of the Code on PS limitation shall not be enforced to ensure funding thereof. The following are the waived items in LGU PS budgets for FY 2011, Pursuant to Section 89 of the General Provisions of the FY 2011 GAA: 4.3.1 Absorption of the cost of hospital services transferred from provinces to newly created cities; 4.3.2 Creation of mandatory positions specified in the Code, for the initial year of such creation; 4.3.3 Payment of the minimum Year-End Bonus of P1,000.00 for the Punong Barangay and P600.00 for other mandatory barangay officials, and their Cash Gifts; and 4.3.4 Payment of Retirement Gratuity and Terminal Leave Benefits of employees.