TRIPARTITE MEMORANDUM OF AGREEMENT

AGRARIAN REFORM COMMUNITIES PROJECT II - PERFORMANCE-BASED GRANT SYSYTEM

(ARCP II-PBGS) - CONTRACT TO REFORM

KNOW ALL MEN BY THESE PRESENTS:

This Tripartite Memorandum of Agreement referred herewith as “Agreement” is made and entered into this ___ day of
____ 2013 by and amongst:

The DEPARTMENT OF AGRARIAN REFORM, a government agency organized and existing under the laws of the
Philippines, mandated to lead the implementation of the Comprehensive Agrarian Reform Program (CARP) through land tenure
improvement, agrarian justice and coordinated delivery of essential support services to farmer-beneficiaries, with principal office
at Elliptical Road, Diliman, Quezon City, represented herein by JERRY E. PACTURAN in his capacity as Undersecretary for
Support Services and Project Implementation Officer for foreign-assisted projects (FAPs) , and hereinafter referred to as DAR;

and

The DEPARTMENT OF FINANCE – Municipal Development Fund Office, a government agency organized and
existing under the laws of the Philippines, mandated to formulate and implement revenue policies that will ensure critical funding
of government programs and projects, with principal office at Pablo Ocampo corner Roxas Boulevard, Manila, represented
herein by ROSALIA V. DE LEON in her capacity as designated representative of Secretary CESAR V. PURISIMA, as
Chairperson of the MDFO-Policy Governing Board, and hereinafter referred to as DOF-MDFO;

and

The MUNICIPALITY of ____________, a local government established and existing under the laws of the Philippines,
with principal office address at Municipal Hall, __________________, Province of _________________, represented herein by
_________________, hereinafter referred to as LGU;

W I T N E S S E T H That:

WHEREAS, the Government of the Philippines (GOP) has secured a loan in the amount of SEVENTY MILLION
DOLLARS (US$70 million) from the Asian Development Bank (ADB) and THIRTY MILLION DOLLARS (US$30 million) from the
OPEC Fund for International Development (OFID), the total amount of which will be administered by the ADB, hereinafter
referred to as the “Bank”, to assist in the financing of the Agrarian Reform Communities Project II (ARCP II), hereinafter referred
to as the “Project”;

WHEREAS, the Project seeks to reduce poverty in selected ARCs and ARC Clusters in nineteen (19) Project
provinces spread across six (6) regions and to enable the Agrarian Reform Beneficiaries (ARBs) in these areas to have
sustained improvements in incomes and quality of life;

WHEREAS, the Project’s overall goal is being pursued through the implementation of an integrated and
complementary package of development investments involving three major project components: Community-Driven
Development (CDD), Rural Infrastructure (RI) and Agriculture and Enterprise Development (AED);

WHEREAS, the Project is implemented, with DAR as the executing agency and the MDFO as fund conduit for the
Project’s RI component in coordination with various National Government Agencies (NGAs) and Local Government Units (LGUs)
as partners;

WHEREAS, Schedule 5, Section C (Execution of Project and other Matters, Performance Based Grant System) of the
Loan Agreement between the Republic of the Philippines and Asian Development Bank dated 8 December 2008 requires the
government to ensure that LGUs, which will participate in the Project and implement policy reform initiatives, shall receive
additional grant to be set forth in the Performance Based Grant Agreement between DOF-MDFO and LGUs. Such reform shall
be certified by DOF-MDFO’s Technical Committee (TC) and Steering Committee (SC) of the Performance Based Grant System
(PBGS).

WHEREAS, the DOF, through the MDFO, had developed the Performance Based Incentive Policy (PBIP) aimed at
improving LGU performance by linking the incentive to the achievement of a set of requirements and progressive performance
targets;

WHEREAS, the Development Budget Coordinating Committee (DBCC) approved the PBIP and the PBGS as its
implementing mechanism in February 2009;

WHEREAS, under the PBIP, the performance based grant could be in the form of capacity development grant (CDG)
and capital grant (CG);
 WHEREAS, the DAR has allocated an amount of One Billion One Hundred Twenty Million Pesos (P
1,120,000,000.00) under the ARCP II- GOP counterpart for the implementation of the PBGS;

WHEREAS, the LGU has expressed interest to participate in the ARCP II - PBGS and has complied with the eligibility
requirements set forth under the ARCP II-PBGS guidebook, and therefore is qualified to participate in this incentive program;

WHEREAS, the Parties are willing to coordinate and pool their human, technical and material resources for the
purpose of installing reforms in the LGU’s local system to improve municipal performance;

NOW, THEREFORE, for and in consideration of the foregoing premises and by way of formalizing and confirming their
commitments, the Parties hereby enter into this Agreement in accordance with the terms and conditions hereunder set forth;

Article I
The Program

The PBGS provides incentives through additional grants to participating LGUs to encourage them to improve their
overall performance in governance.

Article II
Purpose of the Capital Grant

The LGU shall use the CG solely as equity for the Project’s Rural Infrastructure subprojects/civil works.

Article III
Prohibition

NO portion of the CG shall be used to fund any of the following expenditures:

1. Payment of taxes;
2. Salaries and recurring costs such as maintenance and operation expense; and
3. Micro-credits or Loans.

Article IV
Obligations and Responsibilities

1. The DAR shall:

a) Ensure that the LGU fully understands the requirements under the Governance Conditions (Annex 1), Performance
Measures Matrix- Municipal Level (Annex 2), and Agrarian Reform Sector Indicator (ARSI) reflected in Annex 3 of this
Agreement and other relevant documents, in establishing data and grant allocation/incentive of the LGUs;
b) Encourage LGU to avail of the CG and the CDG;
c) Prequalify LGU availing of the Grants;
d) Review LGU submission of PBGS requirements and endorse them to DOF-MDFO for evaluation of the PBGS Sub-
Technical, Technical and SC;
e) Compute the CG and CDG entitlement of the LGU;
f) Ensure LGU submission of CLUP before Performance Measure Matrix-Municipal Level and ARSI assessment;
g) Participate in the conduct of periodic evaluation of LGU performance by the PBGS Sub-Technical Committee on
Assessment (STCA);
h) Provide logistical support and quality assurance to the conduct of the CG and CDG Assessment;
i) Provide technical assistance to the LGU in compliance with the Performance Measure Matrix- Municipal Level;
i) Represent the sector agency in the PBGS-SC deliberation of all ARCP II PBGS related matters; and
j) Facilitate the conduct of the performance assessment together with the DOF-MDFO.

2. The DOF through the MDFO shall:

a) Coordinate with the PBGS STCA and DAR in assessing the eligibility requirements, Governance Conditions,
Performance Measures Matrix- Municipal Level, and Agrarian Reform Sector Indicator (ARSI) and other relevant
documents, in establishing data and grant allocation/incentive of the LGUs;
b) Facilitate the conduct of periodic assessment of LGU performance;
c) Provide consolidated and overall assessment results of the performance evaluations done during the contract period;
d) Inform the proponent LGU in writing on the decision made by the PBGS-SC on its Capital and Capacity Development
Grant Assessment Report and use the same as basis for the issuance of Certificate of Availability of Funds (CAF);
e) The maximum amount that the LGU may receive from the CG is twenty percent (20%) of the approved RI subproject’s
contract cost (direct and indirect cost excluding pre-implementation and construction supervision costs) with a
maximum amount of __________________;
f) Provide the LGU thirty percent (30%) of the CG entitlement upon compliance of the Governance Conditions;

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 g) Together with the DAR and STCA, facilitate the performance evaluation of the LGU compliance to Performance
Measure Matrix- Municipal Level and ARSI with allocated weight of forty five percent (45%) and twenty five percent
(25%) percent respectively out of the remaining seventy percent (70%) of the CG;
h) Entitle LGU to Performance Measure Matrix- Municipal Level and ARSI assessment upon submission of Governance
Conditions including CLUP;
i) Through the PBGS-SC, determine the weight of accomplishment and its corresponding grant amount of the LGU;
j) As the PBGS Technical Unit, provide the technical and administrative support to the Steering and Technical
Committees including their sub-committees;
k) Document the learnings on the ARCP II- PBGS that would be reported to the DBCC and other stakeholders; and
l) Publish the result of the ARCP II-PBGS Assessment.

3. LGU of ____________ shall:

a) Avail of the PBGS CG equivalent to approximately twenty percent (20%) of the approved Subproject Contract Cost
with a maximum amount of _____________ depending on the income classification of the Municipality;
b) Provide equity amounting to three percent (3%) of the ARCP II- PBGS Governance Condition-CG award;
c) Provide equity amounting to maximum seven percent (7%) of the ARCP II- PBGS Performance Measure Matrix-
Municipal Level and ARSI CG award;
d) Comply with the required PBGS GC to be entitled to thirty percent (30%) of the amount of the CG;
e) Comply with the submission of Comprehensive Land Used Plan (CLUP) as eligibility requirement in the assessment of
Performance Measures Matrix and ARSI which is equivalent to a maximum seventy percent (70%) of the amount of the
CG,;
f) Submit the Sanggunian approved Municipal Development Plan (MDP) if CLUP is not yet available upon Governance
Conditions assessment. The LGU could not be assessed for Performance Measure Matrix-Municipal Level and ARSI
unless the CLUP has been submitted
g) Authorize the DAR, MDFO and STCA to access relevant documents and to conduct appraisal and evaluation visits
pertaining to the availment of the ARCP II-PBG;
h) Utilize ARCP II-PBG solely for purposes provided under Article II of this Agreement;
i) Open a separate trust fund preferably with the Land Bank of the Philippines (LBP) to be used exclusively for the ARCP
II-PBGS. Releases of PBG fund and ten percent (10%) equity shall be deposited. A separate subsidiary ledger is
required to show the 10% equity for PBGS;
j) Appoint a staff who will liaise with the PBGS Assessment Team on concerns regarding monitoring and assessment of
the LGU’s compliance with the signed Performance Measures Matrix;
k) Attend meetings, consultations, workshops and/or seminars that the PBGS Technical Unit may organize from time to
time;
l) Agree to publish the result of the PBGS Assessment; and
m) Access ARCP II- PBGS CDG in case of identified weakness during the periodic assessment.

Article V
Disbursement of Grant

The Grant shall be released in accordance with the following schedule:

1. Thirty Percent (30%) upon submission of the following documents:

a. Letter request from LGU endorsed by NPCO for the release of the 30% Capital Grant entitlement;
b. Appropriation Ordinance on the use of PBGS-CG fund; and
c. Machine validated Bank certification of trust account number (Interest Bearing Current Account), preferably with LBP,
exclusively for ARCP II-PBGS reflecting the equity deposit equivalent to 3% of the CG.

2. Seventy Percent (70%) upon submission of the following:

a. Letter request from LGU endorsed by NPCO for the release of the maximum 70% Capital Grant entitlement; and
b. Equity deposit amounting to 70% (maximum) of the 10% CG required equity.

Article VI
Records and Reports

1. The LGU shall maintain a separate financial management record and system for the implementation and
monitoring of the PBGS;

2. If the PBG fund forms part of the equity for Rural Infrastructure, then it should be reflected in the Statement of Receipts and
Disbursements (SORD) and Certificate of Status of Funds (CSF) of the Rural Infrastructure implementation; and

3. The LGU shall close the books of the ARCP II-PBG upon the closing of ARCP II.

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 Article VII
Cancellation/Suspension

The DAR and DOF-MDFO, upon the approval of the PBGS SC has a right to cancel and/or suspend this Agreement in the event
that the LGU failed to comply with this Agreement or has misappropriated a portion of the Grants.

Article VIII
Dispute Resolution

All disputes and controversies arising out of in connection with this Agreement, or for breach of any provision hereof, which
cannot be solved by the herein contracting parties, shall be settled through Arbitration in accordance with PD 242 in relation to
Sections 66, Chapter XIV, Book IV of the Administrative Code of 1987, in conjunction with Section 10, Chapter 3 Book VII, of the
same Code.

Article IX
Notices

All notices under this Agreement shall be sent to the following addresses:

For DAR : Undersecretary, Support Services Office / Project

Implementing Officer, Foreign Assisted Office

For MDFO : Executive Director

For the LGU : The Mayor

LGU of _______

Article X
Warranties

1. The LGU warrants that it has secured the necessary authorization as shown by the Resolution of the Sangguniang Bayan to
enter into this Agreement;

2. The Parties hereby warrant that in connection with entering into and performance of this Agreement, they or their
representatives have not offered, paid or given, and will not offer, pay or give, anything of value either directly or indirectly to
any government official or employee for the purpose of influencing an actor decision in his official capacity or inducing him
to use his influence with the government; and

3. The Parties hereby warrant that they or their representatives have not exerted or utilized, and will not exert or utilize, any
corrupt or unlawful influence to secure or solicit this Agreement for any considerations or commissions.

Article XI
Effectivity

This Agreement shall be effective immediately upon signing thereof and shall remain effective until all the covenants have been
fulfilled by the Parties.

IN WITNESS THEREOF, the parties, through their duly authorized representative have affixed their respective signatures on
________ at _______________________.

Department of Agrarian Reform Department of Finance

By: By:

JERRY E. PACTURAN ROSALIA V. DE LEON

Undersecretary Treasurer of the Philippines
Chairman, MDFO-Policy Governing Board

MUNICIPALITY OF __________
By:

________________________
Municipal Mayor

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 SIGNED IN THE PRESENCE OF:

HERMINIA FE B. SAN JUAN HELENA B. HABULAN

ARCP II NPC Executive Director

____________________
Municipal Treasurer

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 ACKNOWLEDGEMENT

Republic of the Philippines )

City of` ) SS

BEFORE ME, a Notary Public in and for ____________________, Philippines, on this ______ day of
_______________, 2013, personally appeared

NAME Community Tax Certificate Date and Place of Issue

ROSALIA V. DE LEON
JERRY E. PACTURAN
MUNICIPAL MAYOR

who are known to me and to me known to be the same officials who executed the foregoing instrument and acknowledged that
the same to me is their free act and voluntary deed.

The foregoing instrument consisting of ____ typewritten pages signed by the official representatives of the parties and
their witnesses on every page thereof refers to the Tripartite Memorandum of Agreement – Agrarian Reform Communities
Projects II – Performance-Based Grant System - Contract to Reform between the Department of Finance-Municipal
Development Fund Office (DOF-MDFO), Department of Agrarian Reform (DAR) and the Municipality of _________ for the
purposes therein set forth.

WITNESS my HAND and NOTARIAL SEAL on the date and place above written.

NOTARY PUBLIC
Doc. No
Page No.
Book No.

Tripartite Memorandum of Agreement – ARCP II – PBGS “Contract to Reform”

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