Republic of the Philippines

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
______________________________________________________________________________

29 March 2019

Governor
Provincial Governor
Province of

Management Letter on the Compliance Audit on the

Utilization of the 20% Development Fund, pursuant to Item 3.2
of DBM-DOF-DILG JMC No. 1 dated November 4, 2020
For the Period covering from 01 January 2022 to 31 December 2022

Dear Honorable Governor:

1) We have audited the implementation of projects particularly on the utilization of the 20%
Development Fund (DF) of the Provincial Government of covering the period 01 January
to 31 December 2022.

2) We conducted our compliance audit in accordance with the International Standards of

Supreme Audit Institutions on compliance auditing (ISSAI 4000). Those standards require
that we plan and perform the audit to obtain a reasonable basis for our conclusions.

3) The audit was conducted to ascertain compliance with Department of Budget and
Management (DBM), Department of Finance (DOF) and Department of Interior and Local
Government (DILG) Joint Memorandum Circular (JMC) No. 1 s. 2020 dated November 4, 2020 ,
specifically Item 3.2 of the JMC.

4) Section 287 of the Local Government Code of 1991 otherwise known as Republic Act
(RA) No. 7160 provides that, "Each local government unit shall appropriate in its annual
budget no less than twenty percent (20%) of its annual internal revenue allotment for
development projects”.

5) Department of the Interior and Local Government (DILG) and Department of Budget and
Management (DBM) has issued guidelines and policies on the appropriation and utilization
of the 20% DF.

6) However, given the observed practices of LGUs in the utilization of the 20% DF, the
current circumstances in the development sector, and the prevailing demands for the
delivery of public services, it was deemed imperative to revise the guidelines and policies
on the utilization of the 20% DF to enable the LGUs to better address the constant evolving
development needs of their respective constituents. Hence, DBM-DOF-DILG Joint
 Memorandum Circular (JMC) No. 1 dated November 4, 2020 was issued to increase the
responsiveness of the guidelines and promote greater autonomy, transparency and
accountability in the LGUs’ appropriation and utilization of their respective 20% DFs.

7) Section 3.2 of DBM-DOF-DILG JMC No. 1 identified the following and guidelines in the
appropriation and utilization of the 20DF:

3.2.1 The 20% DF shall be utilized to finance the LGUs' priority development projects,
as embodied in their respective duly approved local development plans, and
medium-term and annual investment programs, which should be harmonized with
the Regional Development Plan and the Philippine Development Plan.

3.2.2 The development projects that may be included under the 20% DF shall be those
that are necessary, appropriate, or incidental to efficient and effective local
governance, and those which are essential to the promotion of the general welfare
of the people.

3.2.3 The LGUs shall ensure that the development projects to be funded
out of the 20% DF are well-planned and procurement-and-
implementation-ready.

3.3.4 Technical assistance may be sought from National Government Agencies

(NGAs), such as, but not limited to, the Department of Agriculture, DBM,
Department of Education, Department of Environment and Natural Resources,
DOF, Department of Health, DILG, Department of Public Works and Highways,
Department of Social Welfare and Development, and National Economic and
Development Authority, for the determination of the more relevant and responsive
development projects that may be included under the 20% DF and to ensure
compliance with the standards prescribed by the NGAs concerned.

3.3.5 The following expenditure items shall not be allowed to be charged

against the 20% DF:

3.2.5.1 Personal Services expenditures, such as salaries, wages, overtime pay,

and other personnel benefits;

3.2.5.2 Administrative expenses, such as supplies, meals, representation,

communication, water and electricity, petroleum products, and the
like:

3.2.5.3 Traveling expenses, whether domestic or foreign;

 3.2.5.4 Registration fees and other expenses related to the
conduct of and participation to trainings, seminars,
conferences or conventions;
3.2.5.5 Purchase, maintenance or repair of administrative office' furniture,
fixtures, equipment or appliances; and

3.2.5.6 Purchase, maintenance or repair of motor vehicles used

for administrative purposes.
8)

23) The management appreciated the audit recommendations and assured taking actions
thereon.
Status of Implementation of Prior Year’s
Audit Recommendations
24) As no compliance audit was conducted in prior year, hence no data for this section.
Acknowledgment
25) We wish to express our appreciation to the Management and staff of the City of ABC for the
cooperation and assistance extended to our Audit Team during the audit.
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26) We request that the appropriate actions be undertaken on our audit recommendations and
that we be informed of the actions taken thereon by accomplishing the attached Agency
Action Plan and Status of Implementation (AAPSI) form and submit it to us (in hard and
electronic copies) within 60 days from the receipt hereof.
Very truly yours,
COMMISSION ON AUDIT
By:
Supervising Auditor
Copy furnished:
- The Regional Director
Department of the Interior and Local Government, Region ABC
- The Regional Director
Department of Budget and Management, Region ABC
- The Regional Director
Bureau of Local Government Finance, Region ABC
- The Secretary
Sangguniang Panlungsod, City of ABC