Maintaining

Public Financial Management (PFM)

Understanding
Maintaining PFM Understanding

Definition:

Gaining understanding of Public Financial Management

(PFM) as a whole system, specifically the relationship
between objectives, policies, strategies, programs and
projects, and the outcomes of the PFM system, including
sustainable social benefit.
 Maintaining PFM Understanding
Rationale:
• PFM in the Philippines is conducted by PFM functional
practitioners: accountants, auditors, planners, program
managers, budget, cash management/treasury, and
procurement staff.

• Each person needs to have some knowledge of the work of

others, and the inter-relationships with them.

• By using this knowledge to better inform the work that they

do, they will contribute to the overall efficiency of the PFM
system and be able to adapt effectively to support the PFM
Reforms.
 Course Blueprint
FC1: Maintaining PFM Understanding
Module
PFM Essentials
Budget and Budgeting in the LGU
The Local Budgeting Framework
The Local Budget Process
Public Financial Management Assessment Tool
Other Activities
PFM Essentials
What is Public Financial Management?

PFM is the system by which public financial

resources are planned, directed, and
controlled to enable and influence the
efficient and effective delivery of public
service goals.
- (CIPFA, 2010)
 Objectives of the PFM

Fiscal Allocative Operational

Discipline Efficiency Efficiency
 Course Blueprint
FC1: Maintaining PFM Understanding
Module
PFM Essentials
Budget and Budgeting in the Local Government
The Local Budgeting Framework
The Local Budget Process
Public Financial Management Assessment Tool
Other Activities
Fundamental Principles in
Local Government Budgeting
 Fundamental Principles in
Local Government Budgeting
(Section 305 of the Local Government Code of 1991)

• No money shall be paid out of the local treasury except in pursuance

of an appropriations ordinance or law;
• Local government funds and monies shall be spent solely for public
purposes;
• Local revenue is generated only from sources expressly authorized by
law or ordinance, and collection thereof shall at all time be
acknowledge properly;
• All monies officially received by a local government officer in any
capacity or on any occasion shall be accounted for as local funds
unless otherwise provided by law;
 Fundamental Principles in
Local Government Budgeting
(Section 305 of the Local Government Code of 1991)

• Trust funds in the local treasury shall not be paid out except in
fulfillment of the purpose for which the trust was created or the funds
received;
• Every officer of the local government unit whose duties permit or
require the possession or custody of local funds shall be properly
bonded, and such officer shall be accountable and responsible for said
funds and for the safekeeping thereof in conformity with the
provisions of law;
• Local governments shall formulate sound financial plans, and local
budgets shall be based on functions, activities, and projects, in terms
of expected results;
 Fundamental Principles in
Local Government Budgeting
(Section 305 of the Local Government Code of 1991)

• Local budget plans and goals shall, as far as practicable, be

harmonized with national development plans, goals, and strategies in
order to optimize the utilization of resources and to avoid duplication
in use of fiscal and physical resources;
• Local budgets shall operationalize approved local development plans;

• Local government units shall ensure that their respective budgets

incorporate the requirements of their component units and provide
for equitable allocation of resources among these component units;
 Fundamental Principles in
Local Government Budgeting
(Section 305 of the Local Government Code of 1991)

• National planning shall be based on local planning to ensure that the

needs and aspirations of the people as articulated by the local
government units in their respective local development plans, are
considered in the formulation of budgets of national line agencies or
offices;
• Fiscal responsibility shall be shared by all those exercising authority
over the financial affairs, transactions, and operations of the local
government units; and
• The local government unit shall endeavor to have a balanced budget
in each fiscal year of operation.
What is a Budget?
What is a Budget?
Layman’s Definition Government’s Definition

An estimate of “A financial plan

income and embodying the
expenses for a estimates of income
set period of and expenditures for a
time. given period of time
(usually for one (1)
fiscal year).”
What is Budgeting?
Budgeting

As a function pushes, strengthens, and

bridges the interconnection of the different
elements of the PFM
 FUNCTIONS OF BUDGETING
PLANNING CONTROL
To ensure that what is
To set a limit in the
implemented is part
expenditures.
of the plan.

DEVELOPMENT ACCOUNTABILITY
To ascertain that
To drive development. programs have attained
their targets.
 Course Blueprint
FC1: Maintaining PFM Understanding
Module
PFM Essentials
Budget and Budgeting in the LGU
The Local Budgeting Framework
The Local Budget Process
Public Financial Management Assessment Tool
Other Activities
The Local Budgeting Framework
THE LOCAL BUDGETING FRAMEWORK
Participatory Budgeting
 PARTICIPATORY BUDGETING
• Participatory budgeting is an approach wherein citizens, through
CSOs, are allowed to take part in the process of allocating public
resources.

• It offers citizens the opportunity to contribute in the formulation of

options and in making choices that will affect how their
government acts.
\

• Since participatory budgeting helps promote transparency, it has

the potential of reducing government inefficiencies and
corruption.
 LEGAL BASES

Section 3[I] of the Local

Government Code Section 34 of the Local
Section 23, Article II of
the 1987 Constitution Government Code
“The participation of the
private sector in local “[LGUs] shall promote the
“The State shall
governance, particularly establishment and
encourage non-
in the delivery of basic operation of people’s and
governmental,
services, shall be non-governmental
community-based or
encourage to ensure the organizations to become
sectoral organizations
viability of local autonomy active partners in the
that promote the welfare
as an alternative strategy pursuit of local autonomy”
of the nation”
for sustainable
development”
Other Activities
 Guidelines on Participatory Budgeting

LGUs shall allow and practice genuine participation of people in the planning and
budgeting processes to promote and establish transparency and accountability in all
transactions related to Public Financial Management (PFM).

LGUs shall encourage participation and involvement of the CSOs, as part of the
LDCs and as observers in the LFCs, in the processes of setting directions and
allocating available resources. The purpose is to draw concerned citizens together
to participate and give inputs in decision-making related to the local plans and
budget

LGUs shall apply democratic principles in group decision-making techniques to

arrive at choices and preferences that are genuinely responsive to people’s needs,
particularly those of the marginalized and disadvantaged members of society
Other Activities
 Guidelines on Participatory Budgeting

LGUs shall embody decisions arrived at in the plan and budget as products of broad-based
consultation and participation that engender people’s collective consensus, commitment, and
ownership

LGUs are encouraged to enhance participative planning in difference venues such as:

Focused Group
Training
Discussions Digital
Workshops Formal institutions
(FGD) Governance

Other Activities
 Guidelines on Participatory Budgeting

LGUs shall establish priorities and allocate resources during investment programming of
programs, projects, and activities (PPAs) as major links to budgeting. The ranked PPAs
and their corresponding resource requirements become the bases for preparing the annual
budget proposals
Participatory Budgeting
Rules of Engagement

Integrity
National
Transparency
Interest
Respect for
Internal
Accountability Consultation
Process
and Mutual
Empowerment

Sustainability Partnership
 Benefits of Participatory Budgeting

Service gaps due to Fund Constraint may be addressed

Helps the LGU maximize
by CSOs or the private sector who participate willingly in
the use of resources the execution of public projects

Reduces delay in the Delays in project implementation caused by conflicts from

concerned Groups who were never involved in the
implementation of urgent formulation of project or activity may be resolved through
projects active engagement by the CSOs
 Benefits of Participatory Budgeting

Develops trust in the Bringing the Government closer to the people enhances
Government partnerships in all government undertakings

Ensures continuity and People who have ownership of the plan are committed to
sustainability of plans and its effective implementation until completion even when
budgets there is a change in leadership
Benefits of Participatory Budgeting

Ensures continuity and The vigilance of stakeholders in monitoring the status of

approved PPAs in all phases of the budget will ensure
sustainability of plans and the successful delivery of goods and services to target
budgets clients
 Roles of the CSO in the Local Budget Process
Budget Preparation Phase
Activity
Issuance of the Budget Call
Budget Forum
Preparation and submission of
the Budget Proposal
CSO role
Check the Annual Investment Program (AIP) priorities are
highlighted in the Budget Call
CSO may participate in the Budget Forum
The accredited CSO partner may partner with the Department
Heads concerned in determining the target beneficiaries and
funding requirements for the particular sector
The CSO may also proposed projects for consideration by the
Department Heads
If the proposal of the CSO is not included in the Budget, the
CSO can request information on the reasons for its non-
inclusion
 Roles of the CSO in the Local Budget Process
Budget Preparation Phase
Activity CSO role

Budget Hearings The CSOs may participate to provide inputs on sectoral

concerns

Evaluation of Budget Proposals May replicate the best practices of other CSOs in
engaging LFC

Submission of Budget to Sanggunian May attend the State of the Province/City/Municipality

Address
 Roles of the CSO in the Local Budget Process
Budget Authorization Phase
Activity
Deliberation of the Budget
Authorization of the Annual Budget
Approval of the Appropriation Ordinance
Posting of the Appropriation Ordinance
CSO role
Observe the Internal Rules of Procedure (IRP) of the
Sanggunian, the accredited CSOs may:
a. Provide inputs on sectoral concerns; and
b. Raise questions on changes in the Executive
Budget not found in the approved AIP.
Accredited CSOs may observe the voting conducted by the
Sanggunian
Accredited CSOs may inform the Local Chief Executive (LCE)
in writing of their observation in the deliberation and
enactment of AO, subject to the applicable reglamentary
period
Monitor the posting pursuant to the requirements under the
LGC of the approved AO, and may assist in making this
known to the public
Roles of the CSO in the Local Budget Process
Budget Review Phase

Activity CSO role

Issuance of the Review Action May request for a copy of the budget review findings from the
LGU
 Roles of the CSO in the Local Budget Process
Budget Execution Phase
Activity CSO role

During the release the allotments Monitor the LGU compliance on the release of allotments

Inform beneficiaries and communities concerned of the

release allotments through tri-media or conduct meeting with
the beneficiaries and communities concerned

Posting of the Statement of Receipts and Monitor the postings as required under the LGC and the Full
Expenditures in the LGU website Disclosure Policy of the Department of the Interior and Local
Government (DILG)

Advocate for citizen’s awareness of posted information

through tri-media

Monitor the postings as required under the LGC and the Full
Preparation of Cash Program and Financial Disclosure Policy of the Department of the Interior and Local
and Physical Performance Targets Government (DILG)

Advocate for citizen’s awareness of posted information

through tri-media
 Roles of the CSO in the Local Budget Process
Budget Execution Phase
Activity CSO role

Procurement, obligation and disbursement of funds for PPA implementation

Procurement Process Attend as observer in the procurement process and carry out the responsibilities
provided under Section 13.4 of the IRR of RA No. 9184. May use as reference the
GPBB issued 2014 Procurement Observers Guide.

PPA Execution May participate in the monitoring of ongoing projects and prepare Monitoring
Report for submission to the LCE

THe CSO may check, among others, the 1) Standards of service, 2) quality of
work, 3) timeliness of implementation, 4) pricing of goods, contracts, and services,
5) PPA fund release/utilization; and 6) proper delivery to target beneficiaries

May assist the LGU in undertaking appropriate interventions on negative

deviations on PPA execution, which may include providing possible support for
service and/or resource gaps in the delivery of services

May check the LGU compliance with the review findings

 Roles of the CSO in the Local Budget Process
Budget Accountability Phase

Activity CSO role

Evaluation of the outputs and Results of the May participate in the project evaluation
PPAs
Enhance CSOs own technical capability in project
evaluation

May provide recommendations based on evaluation

results

May organize citizens’ fora with the LGU to provide

feedback to the community
Performance-Informed Budgeting
Performance-Informed Budgeting (PIB) is the budgeting approach
that uses performance information to link funding to results and to
provide a framework for a more informed resource allocation and
management.
 Legal Bases of PIB

Section 317 [b][3] of
the LGC
Budget proposals [of LGUs]
shall include a brief description
of the functions, projects, and
activities for the ensuing fiscal
year, expected results for each
function, project, and activity,
and the nature of work to be
performed, including the
objects of expenditure for each
function, project and activity.
Section 305 [g] of the LGC
Local governments shall
formulate sound financial
plans, and local budgets shall
be based on functions,
activities, and projects, in
terms of expected results
Section 306 [g] of the LGC
Expected Results refers
to the services, products,
or benefits that will
accrue to the public,
estimated in terms of
performance measures,
or physical targets.

Other Activities
 Key Players in Perfomance-Informed Budgeting

Local Chief
Department/Office Heads LPDC Budget Officer Accountant
Executive
The PIB Conceptual Framework
PIB enables the more meaningful presentation of the budget,
whereby each government peso is aligned with performance
indicators and tangible targets of the LGU

Mandate, Mission and Vision

Organizational Outcomes
Major Final Outputs
Programs, Projects, and Activities

PIB Structure
 Key Features/Benefits of PIB
• Reinforce the meaning of accountability as a commitment to perform;
• Empower citizens to participate in the utilization and allocation of resources with
more transparent, accountable, and responsive budget documents;
• Enable LGUs to see opportunities on how activities fit in the broader development
plan and how they could collaborate with other LGUs in achieving a common goal;
• Allow the Executive Branch to ensure that each peso spent is tightly linked to its
priority outcomes, to reduce overlaps and to avoid duplicative or inefficient
spending;
• Enable the Sanggunian to better evaluate the budget proposals and exercise their
oversight function to check if the LGU deliver the targeted results; and
• Ensure that projects and program are properly aligned with the local and national
development goals and objectives.
PIB Process

Determine the
Formulate the Determine the
relevant
Major Final PPAs to be
performance
Outputs (MFOs) implemented
indicators (PIs)
Performance-Informed Budgeting (PIB)

“May kwento
ang bawat
kwenta”
Policy-Based Budgeting
Policy-Based Budgeting

Policy-based budgeting means that the budget is

prepared with due regard to local government policy,
which, in turn, should be harmonized with the
development plans and reflected in the investment
programs.

Section 106 of the LGC
Each LGU shall have a
comprehensive multi-sectoral
development plan to be initiated
by its development council and
approved by its Sanggunian. For
this purpose, the development
council at the provincial, city,
municipal, or barangay level, shall
assist the corresponding
Sanggunian in setting the
direction of economic and social
development, and coordinating
development efforts within its
territorial jurisdiction
Legal Bases
Section 109 [a] [1-2] of
the LGC
(a) The provincial, city, and
municipal development
councils shall exercise the
following functions: (1)
Formulate long-term,
medium-term, and annual
socio-economic
development plans and
policies; and (2) Formulate
the medium-term and
annual public investment
programs.
Section 305 [h] of the LGC
Local Budget plans and goals
shall, as far as practicable, be
harmonized with national
development plans, goals and
strategies in order to optimize
the utilization of resources and to
avoid duplication in the use of
fiscal and physical resources
Section 305 [i] of the LGC
Local budgets shall
operationalize approved
local development plans
Other Activities
 Policy-Based Budgeting
Linking the Budget with Harmonized
Procurement Planning
Plans and Policies
● Identify the plans and investment LGUs should be able to observe the

●
programs which should be prepared
Clarify relationship of these plans with H Synchronized Planning and
Budgeting Calendar
the ELA

Article 410, IRR of RA No. 7160

● AIP should be prepared and approved
before the start of the local budget
preparation phase; and As soon as the AIP is approved, the PPMPs
● Local budgets shall fund PPAs in the AIP may already be prepared

Linking the Budget with Harmonized Procurement Planning

Plans and Policies
 Policy-Based Budgeting
Linking the Budget with Harmonized
Procurement Planning
Plans and Policies
● Identify the plans and investment LGUs should be able to observe the

●
programs which should be prepared
Clarify relationship of these plans with H Synchronized Planning and
Budgeting Calendar
the ELA

Article 410, IRR of RA No. 7160

● AIP should be prepared and approved
before the start of the local budget
preparation phase; and As soon as the AIP is approved, the PPMPs
● Local budgets shall fund PPAs in the AIP may already be prepared

Linking the Budget with Harmonized Procurement Planning

Plans and Policies
 Policy-Based Budgeting
PDFP/CDP
PLAN
Development Planning
(6-15 years)

PDP/LDIP

Investment Programming
(3-6 Years)
Link AIP

(1 Year)

Annual/Supplemental
BUDGET (1 Year)
budget
 Policy-Based Budgeting
Linking the Budget with Harmonized
Procurement Planning
Plans and Policies
● Identify the plans and investment LGUs should be able to observe the

●
programs which should be prepared
Clarify relationship of these plans with H Synchronized Planning and
Budgeting Calendar
the ELA

Article 410, IRR of RA No. 7160

● AIP should be prepared and approved
before the start of the local budget
preparation phase; and As soon as the AIP is approved, the PPMPs
● Local budgets shall fund PPAs in the AIP may already be prepared

Linking the Budget with Harmonized Procurement Planning

Plans and Policies
Synchronized Local Planning and Budgeting Calendar
SPLBC Revised 2016
 Policy-Based Budgeting
Linking the Budget with Harmonized
Procurement Planning
Plans and Policies
● Identify the plans and investment LGUs should be able to observe the

●
programs which should be prepared
Clarify relationship of these plans with H Synchronized Planning and
Budgeting Calendar
the ELA

Article 410, IRR of RA No. 7160

● AIP should be prepared and approved
before the start of the local budget
preparation phase; and As soon as the AIP is approved, the PPMPs
● Local budgets shall fund PPAs in the AIP may already be prepared

Linking the Budget with Harmonized Procurement Planning

Plans and Policies
Procurement Planning and Budgeting

Sanggunian Department/Office Budget Officer

Evaluation
Preparation
of the
of Project
Approved PPMPs
Procurement
AIP Management
during the
budget
Plans
preparation
 AIP Preparation Flow Chart
Activity Indicative Schedule Responsible Officials

Issue Invitation to LDC Members On or before May LDC Secretariat/LPDC

LDC Meeting (Prepare and Within the month of May LDC

Approve AIP)

Submit LDC-Approved AIP to the Within the month of May LPDC/LBO/LDC

Sanggunian

Conduct AIP Within the month of May Sanggunian/LPDC/LBO

On or before June 7 Sanggunian

Key Players in Policy-Based Budgeting

LDC Executive Committee

Secretariat
LDC Members

Sanggunian
LDC Chairman
The Cash Budgeting System
 Legal Bases
Section 322 of the LGC
“Unexpended balances of appropriations authorized
in the annual appropriations ordinance shall revert to
the unappropriated surplus of the general fund at the
end of the fiscal year and shall not thereafter be
available for the expenditure except by subsequent
enactment. However, appropriations for capital
outlays shall continue to remain valid until fully
spent, reverted or the project is completed.
Reversions of continuing appropriations shall not be
allowed unless obligations therefor have been fully
paid or otherwise settled xxx”
Section 328 of the LGC
“Appropriations for ordinary
administrative purposes not duly
obligated shall terminate with the fiscal
year and all unexpended balances
thereof shall be automatically reverted
on the thirty-first (31st) day of
December of each year to the general
fund of the local government unit.
 Fundamental Principles of CBS
Section 305 of the LGC

(g) Local governments shall formulate sound financial plans, and

local budgets shall be based on functions, activities, and projects, in
terms expected results;

(h) Local budgets plans and goals shall, as far as practicable, be

harmonized with national development plans, goals, and strategies
in order to optimize utilization of resources and to avoid duplication
in use of fiscal and physical resources
 Under the CBS, payment is done within the fiscal year
and up to a three (3) - month Extended Payment Period
(EPP) after the goods and services are inspected and
accepted by December 31 of the fiscal year.
Proposed transition steps may include

Multi-Year Planning Activities

Formulate a Procurement Strategy

Proposed projects that are ready for implementation

Early Procurement to be undertaken in time to anticipate a

January-December contract implementation Scheme
 Benefits of adopting CBS
1. Once implementation schedules have aligned to the new shorter
time horizons, LGUs will only need to focus on implementing the
current year’s budget;
2. LGUs administrative load as well as the accounting for the use of
funds will substantially decrease and be simplified;
3. Transactions with contractors and suppliers will be smoother and
more transparent as the latter can easily obtain information on
what is appropriated for them in the budget;
4. LGUs will find that non-compliance by contractors and suppliers in
contract agreements are lessened; and
5. LGUs will only include implementation-ready projects in their local
budget
 Course Blueprint
FC1: Maintaining PFM understanding
Module
PFM Essentials
Budget and Budgeting in the LGU
The Local Budgeting Framework
The Local Budget Process
Public Financial Management Assessment Tool
Other Activities
The Local Budget Process
The Local Budget Process

Preparation
 Budget Preparation

An executive function which

Preparation
mandates the Local Chief
Executive (LCE) to Prepare
the Executive Budget for the
ensuing Fiscal Year

-Section 318, R.A. No. 7160

 Budget Authorization

The Sanggunian shall enact,

through and ordinance, the
Preparation
annual and supplemental
budgets of LGUs

-Section 319, RA. No. 7160

 Budget Review
The Sanggunian shall review
the Appropriation
Preparation Ordinances (AOs) of
component cities,
municipalities, and
baranggays, as the case
maybe, while the DBM
Regional Offices shall review
the AOs of provinces
-Section 326 and 327, R.A.
No. 7160
 Budget Execution
The responsibility for execution of
annual and supplemental budgets
Preparation
and the accountability shall be
vested primarily in the local chief
executives.

-Section 320, R.A. No. 7160

The Vice-LCE shall sign all warrants

drawn on the treasury for all
expenditures appropriated for the
operation of the Sanggunian

-Section 445 (a)(1), 455 (a)(1),

466(a)(1), RA. No. 7160
 Budget Accountability

An executive function which

mandates the Local Chief
Preparation
Executive (LCE) to Prepare
the Executive Budget for the
ensuing Fiscal Year

-Section 318, R.A. No. 7160

The Local Budget Process

Preparation
 Course Blueprint
FC1: Maintaining PFM understanding
Module
PFM Essentials
Budget and Budgeting in the LGU
The Local Budgeting Framework
The Local Budget Process
Public Financial Management Assessment Tool
Other Activities
Public Financial Management
Assessment Tool
Outline of Presentation
❏ Understanding the Conceptual Framework for PFM
Assessment
❏ What is PFM Assessment Tool for LGUs
❏ PFMAT Process
❏ Scoring Methodology
❏ Results of the Assessments
 Understanding the Conceptual Framework of
PFM Assessment
Legal Basis for LGU PFM
1987 Philippine Constitution & Local Government Code of 1991

“The territorial and political subdivisions of the State shall enjoy genuine
and meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them more effective
partners in the attainment of national goals. Toward this end, the State
shall provide for a more responsive and accountable local government
structure instituted through a system of decentralization whereby local
government units shall be given more powers, authority, responsibilities,
and resources.”
 Understanding the Conceptual Framework
of PFM Assessment
Legal Basis for LGU PFM
Operative Principle of Decentralization:

“(b) There shall be established in every local government unit

an accountable, efficient, and dynamic organizational
structure and operating mechanism that will meet the priority
needs and service requirements of its communities;”

PFM is an integral part of such organizational structure

and operating mechanism
Understanding the Conceptual Framework of
PFM Assessment
Public Financial Management (PFM) is a system of rules, procedures and
practices for government to manage public finances encompassing:
❏ budgeting;
❏ accounting;
❏ auditing;
❏ cash management;
❏ management of public debt;
❏ revenue generation; and
❏ public reporting on public sector
financial operations.
Understanding the Conceptual Framework
of PFM Assessment
PFM seeks to address the key challenges of collecting revenues, managing
government spending, and making government agencies operate efficiently
and effectively. It drives government policymakers, managers and
implementers to ask:

a. Is government spending within limits?

b. Is it spending on the right things?
c. Does it obtain best value for money?
Understanding the Conceptual Framework
of PFM Assessment

PFM largely and directly affects the delivery of public

goods and services to the LGU’s constituents
What is PFM Assessment Tool (PFMAT) for
LGUs

A self-assessment instrument designed

to assist LGUs in:

● Evaluating their PFM

performance;
● Formulating strategies to
build on strengths and to
address weaknesses.
What is PFM Assessment Tool for LGUs
The tool describes the characteristics of a good
PFM system, identifies performance indicators
to gauge how the LGU is actually doing in a
particular area of PFM and identifies the
sources of information which will help the LGUs
establish their compliance with graduated levels
of performance.
What is PFM Assessment Tool for
LGUs
Value of the PFMAT

Measure all or some aspects of its PFM that require attention

Adopt new best practices through the development of the PFM

Improvement Plan (PFMIP)

Benchmark against other LGUs performance

Facilitate eligibility for future financial support/reward

What is PFM Assessment Tool for LGUs
OPERATIVE PRINCIPLES OF THE PFMAT
The PFMAT identifies the data sources and pinpoints the responsible LGU
Department or Unit for the Financial Information.
What is PFM Assessment Tool for LGUs

OPERATIVE PRINCIPLES OF THE PFMAT

The PFMAT uses indicators that utilize only quantitative data.
Pillar 1: Policy-Based Budgeting
Indicator No. 1.1: Multi-year perspective in fiscal planning and budgeting
Sub-indicator 1.1.3: Linkage between AIP and Appropriation Ordinance covering the Budgets

Instruction: Fill out Data Table No. 1.1.3 then use it as basis for determining the appropriate score that
corresponds to the minimum requirement of the specific criterion that your LGU has satisfied.

Score CRITERIA

4 In the immediately preceding year, 100% of the items of appropriation in the Appropriation Ordinances covering the
Annual and Supplemental Budgets were based on the duly approved AIP.

3 In the immediately preceding year, at least 95% of the items of appropriation in the Appropriation Ordinances
covering the Annual and Supplemental Budgets were based on the duly approved AIP.

2 In the immediately preceding year, at least 90% of the items of appropriation in the Appropriation Ordinances
covering the Annual and Supplemental Budgets were based on the duly approved AIP.

1 In the immediately preceding year, at least 85% of the items of appropriation in the Appropriation Ordinances
covering the Annual and Supplemental Budgets were based on the duly approved AIP.

0 In the immediately preceding year, less than 85% of the items of appropriation in the Appropriation Ordinances
covering the Annual and Supplemental Budgets were based on the duly approved AIP.
Data Table No 1.1.3 Instruction: From the immediately preceding year’s
Appropriation Ordinances (AO) covering the annual and supplemental
budgets, fill out columns (B) and (C) and compute for the percentage of PPAs
in the AO derived from the duly approved AIP using the formula under
Column (D).

TOTAL NUMBERS
OF PPAs IN THE
TOTAL NUMBERS % OF PPAS IN
AO COVERING
OF PPAs IN THE THE AO DERIVED
FISCAL YEAR THE BUDGETS
AO COVERING FROM THE DULY
DERIVED FROM
THE BUDGETS APPROVED AIP
THE DULY
APPROVED AIP
(A) (B) (C) (D) = (C/B)100
 Pillars of a Good PFM System

Planning & Budgeting Policy-Based Budgeting

Comprehensiveness and
Transparency

Credibility of Budget
Citizens’ Participation
Internal and External Audit

Revenue
Budget Accountability Administration and
Budget Execution

Predictability and Control in

Budget Execution

Accounting, Recording, and

Reporting
Pillars of a Good PFM System
Critical Dimensions Description
The indicators measure whether the budget is prepared with due regard to
Policy-Based government policy
Budgeting

Credibility of the The indicators measure whether the budget is realistic and is implemented as
Budget intended

Predictability and The indicators measure whether the budget is implemented in an orderly and
Control in Budget predictable manner and whether there are arrangements for the exercise of
Execution control and supervision in the use of public funds

The indicators measure whether the budget and fiscal risk oversight are
comprehensive and whether fiscal and budget information is accessible to the
Comprehensiveness public. They also measure the completeness of budget information based on
and Transparency the list of documentary requirements prescribed in the Budget Operations
Manual.
Pillars of a Good PFM System
Critical Dimensions Description

The Indicators measure whether adequate records and information are

Accounting, produced, maintained, and disseminated for purposes of decision-making,
Recording, and control, management, and reporting on operations
Reporting

Internal and External The indicators examine the arrangements for scrutiny of public finances and
Audit follow-up by the local chief executive and/or the legislative council

The indicators measure the extent by which the LGU encourages concerned
citizens organized as CSOs pursue their legitimate and collective interests by
Citizen’s Participation monitoring effectiveness of Programs, Projects, and Activities (PPAs), thus
becoming partners of the LGU in the formulation, monitoring, evaluation, and
improvement of the local budget.
PFMAT Process

Preparing the PFM Conducting

Improvement Plan PFM
(PMIP)
Assessment

Preparing the PFM

Assessment Report
(PFMAR)
PFMAT Process
Scoring Methodology

Average Interpretation Description

Score

4.0 Very Strong Compliance with the requirements of PFM-Related

laws, policies, rules, and regulations is very high

3.0-3.9 Strong Compliance with the requirements of PFM-Related

laws, policies, rules, and regulations is high

2.0-2.9 Weak Compliance with the requirements of PFM-Related

laws, policies, rules, and regulations is poor

1.0-1.9 Very Weak Compliance with the requirements of PFM-Related

laws, policies, rules, and regulations is very poor

Below 1 Non-existent Compliance with the requirements of PFM-Related

laws, policies, rules, and regulations is virtually lacking
PFMAT Process
Using the Results of the PFM Assessments
LGU PFM Assessment Results
National Level
 2021 PFM Assessment
No. Critical Dimensions Mean Score % Contribution to Rank as PFM
overall PFMAT Score Concern

1 Policy-Based Budgeting 2.71 13.00% 3

2 Comprehensiveness and Transparency 3.71 17.76% 7

3 Credibility of the Budget 3.21 15.35% 4

4 Predictability and Control in Budget Execution 2.63 12.58% 2

5 Accounting, Recording, and Reporting 3.27 15.35% 5

6 Internal and External Audit 1.70 8.16% 1

7 Citizens’ Participation in the Budget Process 3.66 17.51% 6

Overall Mean 2.98 100.00%

 FY 2016 (1428 LGUs), FY 2019 (1359 LGUs) and
FY 2022 (884 LGUs) Overall PFMAT Scores

C.D. No. Critical Dimensions (CD) FY 2016 FY 2019 FY 2022

Mean Score Mean Score Mean Score

1 Policy-Based Budgeting 2.27 2.58 2.71

2 Comprehensiveness and Transparency 3.37 3.48 3.71

3 Credibility of the Budget 3.13 3.23 3.21

4 Predictability and Control in Budget 2.77 2.92 2.63

Execution

5 Accounting, Recording, and Reporting 2.80 3.08 3.27

6 Internal and External Audit 1.74 1.89 1.70

7 Citizens’ Participation in the Budget Process 3.37 3.59 3.66

Overall Mean 2.78 2.97 2.98

Thank you!