ows Republic ofthe Philippines DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT DILG-NAPOLCOM Center, EDSA comer Quezon Avenue, West Triangle, Quezon City http: www.dig.com. ph V2 HON. CARLOS T. YAM OILG OPINION NO. 12S, 20 Punong Barangay Unit 1205, Wilshire Plaza, Brgy. Greenhills San Juan City Dear Hon. Yam: This has reference to the letter dated 2 July 2018 of Regional Director Maria Lourdes L. Agustin of DILG-NCR, requesting the Department to render legal opinion on whether or not Barangay Ordinance No. 02, Series of 2018, re “AN ORDINANCE FOR THE PURCHASE OF A CONDOMINIUM UNIT TO HOUSE THE OFFICES OF BARANGAY GREENHILLS THRU LOAN FACILITY OF THE DEVELOPMENT BANK OF THE PHILIPPINES (DBP) UNDER SUCH TERMS AND GONDITIONS HEREIN STATED” and Sangguniang Barangay Resolution No. 2018-01-001, Series of 2018, entitled “A RESOLUTION AUTHORIZING THE PUNONG BARANGAY TO ENTER INTO A CONTRACT FOR THE PURCHASE OF A CONDOMINIUM UNIT WITHIN ANNAPOLIS WHILSHIRE PLAZA AND TO SECURE A LOAN WITH DEVELOPMENT BANK OF THE PHILIPPINES (DBP) NECESSARY TO FINANCE SUCH PURCHASE IN THE AMOUNT OF THIRTY FIVE MILLION PESOS (PHP35,000,000.00) SUBJECT TO EXISTING LAWS, RULES AND REGULATIONS” are within the prescribed powers of the Sangguniang Barangay of Greenhills, San Juan City. In response to your request for a legal opinion on the subject Ordinance and Resolution, Atty. Romualdo Delos Santos, City Legal Officer of San Juan City, in an interoffice letter dated 29 May 2018, has opined that the subject Barangay Ordinance and Sangguniang Barangay Resolution is beyond the scope of the prescribed powers of the Sangguniang Barangay citing Sections 447(a)(2)(iii), 458(a)(2)(iii) and 468(a)(2)(iii), contending among others, that there is no similar express provision for the Sangguniang Barangay to authorize the Punong Barangay to negotiate and contract loans and other forms of indebtedness. Further, in an extended opinion contained in interoffice letter dated 14 June 2018 of Atty. Delos Santos, it was opined that Barangay Greenhills like other Barangays has no power to contract loans and the statement contained in a Department of Budget and Management (DBM) Circular that all financial institution can grant loans to Barangay is contrary to the provisions of the Local Government Gode (LGC).Hence, to clarify the matter, you are now seeking the Department's legal opinion. Atthe outset, Barangay isa local government unit (LGU) created or organized under Republic Act No. 7160, otherwise known as the "Local Government Code” (LGC), which is considered as a body politic and corporate endowed with powers to be exercised by it in conformity with law. As provided in Section 22 of the LGC, every LGU, as a corporation, shall have the following powers: (1) To have continuous succession in its corporate name: (2) To sue and be sued; (3) To have and use a corporate seal; (4) To acquire and convey real or personal property; (5) To enter into contracts; and (©) To exercise such other powers as are granted to corporations, subject to the limitations provided in the LGC and other laws Per Section 389(b)(2) of the LGC, the Punong Barangay (PB) as the chief executive of the barangay government shall have the power to negotiate, enter into, and sign contracts for and in behalf of the barangay, upon authorization of the sangguniang barangay (SB). Such authorization from the SB is also mandated by Section 391(a)(12), LGC. Itis this Department's view that the term “contract” mentioned in the above-quoted provisions includes contract of loan as bolstered by Department of Budget and Management (DBM) Circular! that all financial institutions can grant loans to barangays, subject to existing guidelines and requirements. In support to the said DBM Circular that the term “contract” also includes contract of loan, we would like to quote the following provisions of the LGC, to wit: 4. SECTION 296, General Policy. - (@) It shall be the basic policy that any local government unit may create indebtedness, and avail of credit facilities to finance local infrastructure and other socio-economic development projects in accordance with the approved local development plan and public investment program. () A local government unit may avail of credit lines from government or private banks and lending institutions for the purpose of stabilizing local finances. 2. SECTION 297. Loans, Credits, and Other Forms of Indebtedness of Local Government Units. ~ 1 DBM- Sources of Income ofthe barangay. question number 10(@) A local government unit may contract loans, credits, and other forms of indebtedness with any or domestic private bank and other lending institutions to finance the construction, installation, improvement, expansion, operation, or maintenance of public facilities, infrastructure facilities, housing projects, the acquisition of real property, and the implementation of other capital investment projects, subject to such terms and conditions as may be agreed upon by the local government unit and the lender. The proceeds from such transactions shall accrue directly to the local government unit concerned. (6) A local government unit may likewise secure from any government bank and Jending short, medium and long-term loans and advances against security of real estate or other acceptable assets for the establishment, development, or expansion of agricultural, industrial, commercial, house financing projects, livelihood projects, and other economic enterprises. (c) Government financial and other lending institutions are hereby authorized to grant loans, credits, and other forms of indebtedness out of their loanable funds to local government units for purposes specified above. While it is true that Section 389(b)(2) did not explicitly provide that SB may authorize the PB to negotiate and contract loans and other forms of indebtedness, we see no prohibition in the said provision for the PB to negotiate and contract loans, and to our mind, the said provision is too general, conveying that a PB may negotiate and enter into any kind/type of contract, provided that, he/she is authorized by the concerned SB. Moreover, with the provisions quoted above, it is clearly mentioned that a local government unit (LGU) may create indebtedness and avail of credit facilities, may contract loans, credits, and other forms of indebtedness, and may likewise secure from any government bank and lending short, medium and long-term loans and advances. To reiterate and to give emphasis, a barangay is also a LGU. With due respect to the opinion of Atty. Delos Santos in his Interoffice dated 14 June 2018 that “the statement contained in the said DBM Circular that all financial institution can grant loans to Barangay is contrary to the aforesaid provisions of the LGC and it cannot prevail over the provision of the same law’, attention is invited to Article 426 of the Implementing Rules and Regulations (IRR) of the LGC, viz: “ARTICLE 426 (IRR of the LGC). Responsibility of the Department of Budget and Management and the Commission of Audit. — (a) The DBM, jointly with COA shall, within one (1) year from the effectivity of these Rules, promulgate a Budget Operations Manual for LGUs to improve and systematize methods, techniques, and procedures in local government budget preparation, authorization, execution, and accountability.(6) The DBM shall promulgate such administrative issuances as may be needed from time to time relative to the implementation of the provisions of this Rule. (©) The DBM shall, upon request of LGUs, extend technical assistance on local government budgeting.” ‘As clearly pointed out, the DBM is vested with an authority to promulgate administrative issuance/s as may be needed from time to time relative to the implementation of the LGC and its IRR, concerning local government budget preparation, authorization, execution and accountability. Hence, there is no conflict between the provisions of the LGC and the DBM Circular. Accordingly, the answer of this Department on the issues of whether or not Barangay Ordinance No.02, Series of 2018 and SB Resolution No. 2018-01-001, Series of 2018 are within the powers of the SB, is in the affirmative. ‘We hope to have assisted you on the matter. Very truly yours, By Authority of the Secretary: ‘C. SACENDONCILLO, CESO III Undersecretary i CC: RD Maria Lourdes L. Agustin Regional Director DILG-NCR sssogf t Ww