DEPARTMENT OF BUDGET & MANAGEMENT

PUBLIC FINANCIAL MANAGEMENT

ASSESSMENT TOOL
FOR LOCAL GOVERNMENT UNITS
(PFMAT FOR LGUs)

ORIENTATION/WORKSHOP ON THE PFMAT FOR LGUs &

PFM IMPROVMENT PLANNING
Hotel Stotsenberg, Clark Freeport Zone, Pampanga
September 19-22, 2012
OUTLINE OF PRESENTATION

Understanding the Conceptual Framework

for PFM Assessment
- Legal Bases
- PFM & Its Goals
- Rationale for PFM Assessments
- Analytical Framework for PFM Assessments

The PFM Assessment Tool for LGUs

- Basic Concepts
- Value of the PFMAT for LGUs
- Procedures for Conducting a PFM
Assessment
- Using the Results of the PFMAT for LGUs
- The Critical Dimensions, Indicators & Sub-
Indicators
Public Financial Management Assessment

Conceptual
Framework
 UNDERSTANDING THE CONCEPTUAL FRAMEWORK
FOR PFM ASSESSMENT

Legal Bases 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
FOR PFM ASSESSMENT

Legal Bases 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
FOR PFM ASSESSMENT

What is Public Financial Management?

Public Financial Management (PFM) is a system of
rules, procedures and practices for government to
manage public finances encompassing:

o budgeting;
o accounting;
o auditing;
o cash management;
o management of public debt;
o revenue generation; and
o public reporting on public sector
financial operations.
 UNDERSTANDING THE CONCEPTUAL FRAMEWORK
FOR PFM ASSESSMENT

Goals of Public Financial Management

Strategic
Aggregate allocation of
Fiscal Resources
Discipline
Efficient
Service
Delivery

PFM
 UNDERSTANDING THE CONCEPTUAL FRAMEWORK
FOR PFM ASSESSMENT

“Kung walang corrupt, walang mahirap”

Rapid, Just, Inclusive Integrity of the

5 Priority Transparent, Poverty Reduction Equitable & & Lasting Environment/
Accountable & & Empowerment Sustained Peace & the Climate Change
Areas Participatory of the Poor Economic Rule of Law Mitigation &
Governance Growth Adaptation

Societal
Inclusive Growth and Poverty Reduction
Goal

Sectoral
Good Governance Fiscal Discipline
Goal

PFM Goal Improve efficiency, accountability and transparency of public

fund use for better service delivery

Source: PFM Roadmap presentation

PUBLIC FINANCIAL MANAGEMENT AND GOOD
GOVERNANCE

GOVERNANCE

Open and Orderly PFM System

 PUBLIC FINANCIAL MANAGEMENT AND GOOD
GOVERNANCE

Policy Based Budgeting Consensus Oriented

Comprehensiveness & Participatory

Transparency
Following the Rule of
Credibility of the Budget Law

Effective and Efficient

Predictability & Control in
Budget Execution
Accountable
Accounting, Recording and
Reporting
Transparent
Internal and External Audit
Responsive

Citizens’ Participation Equitable and Inclusive

 UNDERSTANDING THE CONCEPTUAL FRAMEWORK
FOR PFM ASSESSMENT

Rationale for PFM Assessments

PFM largely and directly affects the delivery of public
goods and services to the LGU’s constituents

Adequate funds for basic

services
PPAs aligned with
LGU and NG
development goals

Better service at lower costs

 UNDERSTANDING THE CONCEPTUAL FRAMEWORK
FOR PFM ASSESSMENT

Rationale for PFM Assessments

Part of government efforts to institutionalize

governance reforms

 Basis for PFM Improvement

Planning

 Pre-requisite to the release of

funds to LGUs under the
Bottom-Up Budgeting
The PFM Assessment
Tool for Local
Government Units
 The PFMAT FOR LGUs

What is the PFMAT?

A self-assessment instrument designed to

assist LGUs in:
evaluating their PFM
performance;
formulating strategies to
build on strengths and to
address weaknesses;
 The PFMAT FOR LGUs

Value of the PFMAT

Measure all or some aspects of its PFM

that require attention

Benchmark against other LGUs performance

Adopt new best practices through

the development of a PFM
Improvement Plan (PFMIP)

Facilitate accreditation for future donor support

 The PFMAT FOR LGUs

The PFMAT for LGUs is a Self-Administered Tool

 The PFMAT FOR LGUs

Procedures for Conducting PFM Assessments

Getting started…..
1. LCE formally organizes the PFM Team thru an Executive
Issuance

o Department Heads of:

• Treasury
• Budget
• Accounting
• Planning & Development
• GSO / BAC
o Representative of the Office of the LCE

2. LCE designates PFM Team Leader

 The PFMAT FOR LGUs

Procedures for Conducting PFM Assessments

Getting started…..
3. PFM Team should:

o Discuss PFMAT to establish a

common understanding;

o Orient the LCE & Local Sanggunian

on the PFMAT to obtain buy-in
 The PFMAT FOR LGUs

Procedures for Conducting PFM Assessments

4. Distribute pertinent portions of the PFMAT to

responsible Office / Department
5. Responsible Office fills out the PFMAT based on data
listed in the tool
4. Fill out data tables first as basis for determining
applicable score
6. Scores are summarized per Office and per critical
dimension
o Use Summary Tables 3 and 4
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

6. Summarize and explain the results of the

PFMAT in the PFM Assessment Report

The PFM-AR is a concise document containing the ff:

1. Executive Summary
2. Introduction
3. Background Information
4. Assessment of the LGU’s PFM Systems
5. Recommendations
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

 Analyze the results of the PFMAT further

 Focus on dimensions / key elements with low

scores

 Develop strategies to address identified

weaknesses

o Critical problem solving / planning tools

such as Logical Framework Analysis (LFA)
are suggested to be used
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

Value of the LFA in PFM Improvement Planning

 Facilitates in-depth analysis of the results of the

PFMAT, particularly causes of the low scores in
certain elements / dimensions of the PFM system.

 Helps the LGU design projects / programs which

will:
o address identified weaknesses in PFM;
o Sustain / further improve strong areas in
PFM;
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

Recommendations under the PFMAR are detailed in

the PFM Improvement Plan
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

The PFMIP identifies:

1. The critical dimension of an open and orderly PFM

system to be improved
2. The PFMAT Indicator / Sub-Indicator wherein the LGU
obtained low scores
3. The scores obtained for each Indicator / sub-Indicator
4. The Programs / Projects / Activities for improving
performance
5. The expected results from the implementation of the
PPAs
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

The PFMIP identifies:

5. The implementation period , particularly the start and

end periods for PPA implementation
6. The Office/s responsible for implementing the PPAs

7. The proposed budget for PPA implementation

8. The funding source for the proposed budget

 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

Reminders …..

 PFMIP should be submitted to the

Sanggunian / LCE for approval

 LCE / Sanggunian to issue necessary policy

support to help PFMIP implementation

 PFMIP should be integrated in the AIP if

funding is required
 The PFMAT FOR LGUs

Using the Results of the PFM Assessments

 The PFMAT FOR LGUs

Revenue Generation Revenue Generation

Budgeting Budgeting

Management of Public Debt Procurement

Accounting Accounting

Auditing Auditing

Cash Management Cash Management

Public Reporting on Public Public Reporting on Public

Sector Financial Operations Sector Financial Operations
The PFMAT FOR LGUs
 Critical Responsible
Office Indicator / Sub-Indicator
Dimension
1. Multi-year perspective in fiscal planning and budgeting
Planning & 1.1 Linkage between PDPFP/CDP and LDIP
Development 1.2 Linkage between LDIP and AIP
Office
1.3 Linkage between AIP and Appropriation Ordinances
covering the Budgets
2. PFM improvement policies are included in the budgets
covered by Appropriation Ordinances
3. Orderliness of activities in the annual budget process
1. Policy-
based 3.1 Adherence to a fixed calendar for budget preparation and
Budgeting authorization phases
3.2 Timely enactment and approval of the Appropriation
Budget Office Ordinance authorizing the Annual Budget

3.3 Timely submission of the Appropriation Ordinance

authorizing the Annual Budget to the appropriate
reviewing authorityAdherence to a fixed calendar for
budget preparation and authorization phases

3. Financial self-reliance of Local Economic Enterprises

(LEEs) / Public Utilities (PUs)
 Responsible
Critical Dimension Office Indicator / Sub-Indicator

5. Comprehensiveness of budget information

2. Comprehen- Budget Office contained in the Appropriation Ordinance covering
siveness and the Annual Budget
Transparency Office of the
6. Public access to key information
LCE

Treasurer’s 7. Actual local revenue collections compared with

Office estimated revenues in the budget

8. Actual expenditure compared with appropriations

by allotment class

3. Credibility of the 8.1 Total allotments released compared with total

Budget appropriations
Budget Office
8.2 Total actual obligations compared with total
allotments released

8.3 Total actual disbursements compared with total

obligations
 Critical Responsible
Office Indicator / Sub-Indicator
Dimension
9. Real Property Tax Accomplishment Rate
10. Effectiveness of tax enhancement measures
10.1 Computerized RPT database system linkages
10.2 Effectiveness of implementing tax collection
strategies for delinquent Real Property Tax (RPT)

2. Predictability 10.3 Effectiveness of civil remedies on tax payment (For

and Control Treasurer’s provinces and cities only)
in Budget Office 10.4 Planning and monitoring of tax mapping
Execution 11. Predictability in the availability of cash for
commitment of expenditures
11.1 Cash availability to support budgeted program,
projects and activities (PPAs), and liabilities
11.2 Preparation and updating of cash flow forecasts
and cash flow analysis
 Responsible
Critical
Office Indicator / Sub-Indicator
Dimension
12. Value for money controls of procurement

12.1 Use of public bidding for the procurement of goods

(excluding common-use supplies and equipment), civil
works and consulting services in accordance with R.A.
No. 9184 and its IRR
General Services
Office /
12.2 Procurement of Common-Use Supplies and Equipment
2. Predictability Engineering Office
from DBM – Procurement Service
and Control / BAC
in Budget 12.3 Effectiveness of Procurement
Execution
12.4 Publication of procurement-related activities

12.5 Timeliness of completed procurement activities

13. Effectiveness of payroll controls

Accounting Office 14. Effectiveness of internal controls for non-Personal
Services (PS) expenditures
 Critical Responsible
Indicator / Sub-Indicator
Dimension Office

15. Timeliness and regularity of accounts

reconciliation

15.1 Regularity of bank reconciliation

5. Accounting,
Accounting
Recording and
Office
Reporting 15.2 Regularity of reconciliation and
liquidation of cash advances

16. Quality and timeliness of regular financial

reports and annual financial statements
 Critical Responsible
Indicator / Sub-Indicator
Dimension Office
17. Effectiveness of internal audit
17.1 Existence of an operational Internal Audit
Service (IAS)
Office of the LCE 17.2 Frequency and distribution of internal audit
reports
6. Internal and 17.3 Extent of management action on internal
External audit findings
Audit
18. Follow up on external audit

18.1 Compliance with audit recommendations

Accounting Office
18.2 Extent of COA disallowances

3. Magnitude of COA disallowances settled

Planning &
19. Civil Society Organizations (CSOs)
Development
7. Citizens’ accreditation by the Local Sanggunian
Office
Participation
20. Degree of citizens’ participation in the
Budget Office
budget process
 Thank You…

Director Julian Ll. Pacificador, Jr.

DEPARTMENT OF BUDGET & MANAGEMENT
 Source Documents:
PDPFP / CDP; LDIP; Minutes of LDC
Meetings
Source Documents:
LDIP; AIP
 Source Documents:
AIP; Appropriation Ordinance
covering Annual / Supplemental
Budgets
 Source Documents:
Local Sanggunian Resolutions;
Appropriation Ordinance covering
Annual / Supplemental Budgets
 Source Documents:
Budget Call issued by the LCE;
Appropriation Ordinance covering the
Annual Budget
 Source Documents:
Appropriation Ordinance covering
Annual Budget
 Source Documents:
Appropriation Ordinance covering the
Annual Budget; Proof/s of receipt by
reviewing authority
 Source Documents:
LEE’s/PU’s Statement of Income and
Expenditures; Appropriation
Ordinance covering Annual /
Supplemental Budgets
 Source Documents:
Appropriation Ordinance authorizing
the Annual Budget
 Source Documents:
Transcript / Minutes of Local
Sanggunian Proceedings; Local
Sanggunian Resolution(s) on CSO
Accreditation
 Source Documents:
SAOB; Appropriation Ordinances
covering Annual / Supplemental
Budgets; Local Budget Matrix (LBM);
Allotment Release Orders (AROs);
Report of Disbursements
 Source Documents:
Transcript / Minutes of Budget Process
Proceedings; Attendance Sheets
during Budget Hearings / Fora
 Source Documents:
Treasurer’s Statement of Receipts and
Expenditures (SREs); Appropriation
Ordinances covering Annual and
Supplemental Budgets
 Source Documents:
Assessor’s / Treasurer’s Reports; SREs;
 Source Documents:
Database Map / Manual
 Source Documents:
RPT Account Register; Certified List of
all RPT Delinquencies;
 Source Documents:
Treasurer’s Records/Reports; Certified
List of Delinquencies
 Source Documents:
Local Tax Mapping System / Database;
 Source Documents:
LBM; Cash Program; Cash Flow Forecast;
Trial Balance; SAOB
 Source Documents:
Cash Flow Forecast; Cash Flow Analysis;
 Source Documents:
APP-MR; PhilGEPS Abstract; Notices of
Award; BAC Resolutions
 Source Documents:
APP-CSE Monitoring Reports;
Subsidiary Ledgers for Supplies &
Equipment; APRs
 Source Documents:
A/S Procurement Plans; Delivery and
Acceptance Reports
 Source Documents:
PhilGEPs Abstract; Delivery and
Acceptance Reports; Procurement-
related Notices / Documents
 Source Documents:
A/S Procurement Plans; Delivery and
Acceptance Reports
 Source Documents:
Reports required under the “Full
Disclosure Policy” of the DILG
 Source Documents:
Local Sanggunian Resolution
establishing IAS; Internal Audit Manuals;
Internal Audit Reports;
 Source Documents:
Internal Audit Reports; Proof of the
Report’s Receipt by Management;
Documentation of Management’s
Action on Findings;
 Source Documents:
SAOB; COA Annual Audit Report
(AAR)
 Source Documents:
SAOB; COA Annual Audit Report
(AAR)
 Source Documents:
Bank Reconciliation Statements;
COA AOMs; COA AAR
 Source Documents:
Statement of Cash Advances;
Liquidation Reports
 Source Documents:
Financial Reports and
Statements; COA AOMs; COA AAR
 Source Documents:
Financial Reports and Statements;
COA AAR
 Source Documents:
COA Annual Audit Report