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
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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
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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.5.0
6.0
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4.6
For succeeding years after FY 2011, the waived items in an LGU PS budget shall
be those specified in the pertinent general provision of the annual GAA.
Income From Regular Sources - These are income from sources that
generate or provide money for the provincial/city/municipal treasury, such
money recurring at a fixed, uniform, or normal intervals or frequency whether in
fixed or variable amounts.
Income Actually Realized From Local Sources - These are income from
sources within the Philippines that accrue to the barangay treasury.
Next Preceding Fiscal Year — It is a fiscal year that is two (2) years before a
budget year. For example, if FY 2011 is the budget year, the next preceding
fiscal year is FY 2009,
Policy Guidelines
Aside from the policies under Sections 325(a) and 331(b) of the Code, hereunder are
additional policy guidelines:
5.1
5.2
5.3
Funding priorities shall be observed in the formulation of the PS component of
LGU budgets.
Provisions for actual salaries of incumbent personnel occupying regular positions
that were properly granted pursuant to the implementation of R.A. No. 6758, as
amended, shall be prioritized, There shall be no reduction in the actual salaries of
incumbent personnel occupying regular positions for purposes of complying with
the PS limitation.
Vacant and new positions shall be adequately provided with appropriations for
salaries, allowances and benefits, and fixed personnel expenditures, to back up
their legal existence; otherwise, they should be abolished.
Procedural Guidelines
6.1
Determining the PS Limitation
The PS limitation in an LGU budget for a budget year shall be determined as
follows:
6.1.1 For an Existing Province, City, or Municipality or PCM
6.1.1.1 Compute the Total Income From Regular Sources realized in the
next preceding fiscal year or TIRS, based on the trial balance as
of December 31 of said year or from the accomplished Summary
Statement of Receipts and Expenditures, BESF Table No. 1,
page 65 of the Budget Operations Manual for Local Government
Units, 2008 edition. For example, if the budget year is 2011,
then add all items under TIRS in FY 2009.
46.2
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6.1.1.2 Compute the PS limitation by using any of the following
applicable formulae:
PS Limitation ist to ard cass pcm = (45%) (TIRS)
PS Limitation