1.

Is the inclusion of appropriation for Early and Voluntary Separation

Incentive Program (EVSIP) legally tenable?

No. It is not legally tenable. An early retirement program to be valid should

be by virtue of a valid reorganization pursuant to a law passed by
Congress.1 Although local autonomy grants local governments the power to
streamline and reorganize as may be inferred from Sections 16 and 76 of
the Local Government Code of 1991, it does not confer authority upon any
local government unit to create a separate and supplementary retirement
benefit plan.2

Section 28, paragraph (b) of Commonwealth Act No. 186, as amended,

prohibits government agencies from establishing supplementary retirement
or pension plans from the time the Government Service Insurance System
charter took effect, while those plans already existing when the charter was
enacted were declared abolished. The purpose behind the proscription
found in Section 28, paragraph (b), as amended was to address the need
to prevent the proliferation of inequitous plans. According to the Supreme
Court:

“x x x Sec. 28 (b) as amended by RA No. 4968 in no uncertain terms bars

the creation of any insurance or retirement plan – other than the GSIS – for
government officers and employees, in order to prevent undue and
inequitous proliferation of such plans. x x x. To ignore this and rule
otherwise would be tantamount to permitting every other government office
or agency to put up its own supplementary retirement benefit plan under
the guise of such “financial assistance.”3

2. Can the LGU appropriate for Monetization of Leave Credits?

Generally, Monetization of Leave Credits is chargeable against savings.

However, under Civil Service Commission-Department of Budget and
Management (DBM) Joint Circular No. 2, s. 2003, Monetization of Leave
Credits, Collective Negotiation Agreement (CNA) Incentive Bonus,
Overtime Pay, and such other benefits that are authorized by law but are
chargeable against savings of the LGUs may also be included by direct
appropriation either in the annual budget or supplemental budget of the
LGU concerned, provided these are within the Personal Services (PS)
Limitation, as stipulated under Section 325 (a) of RA No. 7160.
3. Can the appropriation for development projects of no less than
twenty percent 20% of the IRA be appropriated in a lumpsum amount?

No. The said appropriation for the 20% Development Fund should cover
itemized projects. Section 287 of RA No. 7160 provides that each LGU
shall appropriate in its annual budget no less than 20% of its annual IRA for
development projects. Article 384 of the IRR of RA No. 7160 further
provides that it shall be mandatory for each LGU to set aside in its annual
budgets amounts no less than 20% of its IRA for the next year as
appropriation for local development projects that embodied or contained in
local development plans.

4. Is an Appropriation Ordinance necessary to authorize utilization of

loan proceeds?

Yes. An Appropriation Ordinance is necessary to authorize utilization of

loan proceeds. Loans, interests, bond issues, and other contributions for
specific purposes form part of the general fund of the LGU.

Pursuant to Section 305 (a) of RA No. 7160, no money shall be paid out of
the local treasury except in pursuance of an appropriation ordinance or law.

5. Is an Appropriation Ordinance necessary to authorize the use of the

shares in the proceeds from the development and utilization of the
national wealth?

Yes. Article 391 of the IRR of RA No. 7160 provides that the proceeds from
the shares of LGUs in the proceeds from the development and utilization of
the national wealth shall be appropriated by their respective Sanggunian to
finance local development and livelihood projects.

Article 454 (d) of the same IRR reiterates this mandate and provides further
that disbursements from such special accounts under the General Fund
shall proceed from itemized appropriations in the budgets of LGU instead
of by lump sum.
Such itemized appropriations shall be for specific development
projects/activities embodied in the local development plan and/or public
investment program formulated and prioritized by the LDC and approved by
the Sanggunian concerned.

6. How is the CNA Incentive Bonus classified in the budget?

The CNA Incentive Bonus shall be taken up as PS Expenditure