LGU Budget Operations

DBM VI -CCL

DILG – CDP TOT

January 20, 2021

Via Zoom Platform

TOPICS

For government to manage public finances

Practices

Rules

Proce-�dures

What is Public Financial Management?

PFM is a system of

PUBLIC FINANCIAL MANAGEMENT

Spending within our means

Investing in the right priorities

Empowering citizens

through fiscal transparency, accountability & participation

Delivering measurable results

PARTICIPATORY

POLICY-BASED

PERFORMANCE-

INFORMED

LOCAL BUDGETING FRAMEWORK

within our means

invests in the right priorities

delivers measurable results

empowers citizens

• Identify the plans and investment programs which should be prepared
• Consider policies of both executive and legislative departments

LGUs should be able to observe the Synchronized Planning and Budgeting Calendar

Article 410, IRR of RA No. 7160:

• AIP should be prepared and approved before the start of the local budget preparation phase; and
• Local budgets shall fund PPAs in the AIP.

As soon as the AIP is approved, the PPMPs may already be prepared.

POLICY-BASED BUDGETING

LDC to formulate long-term, medium term and annual socio-economic development plans and policies and investment programs

Section 109 RA 7160

Section 114 RA 7160

DRRM

Policies, programs and projects proposed by the LDC shall be submitted to the Sanggunian concerned for appropriate action

Debt Service

Article 410 IRR, RA 7160

The AIP shall be prepared and approved before the start of budget preparation phase. Local budget shall fund Programs, Projects, Activities in the AIP

PFM Element: Policy-based 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.

PERFORMANCE-INFORMED BUDGETING

“may kwento

ang bawat kwenta”

LGUs shall formulate sound financial plans and local budget shall be based on functions, activities and projects, in terms of expected results [Sec. 305(g)]

PERFORMANCE BUDGETING in LGUs

Budgetary Terms

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Budgetary Accounts

Appropriation – an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or purposes

Allotment – an authorization issued by the Local Chief Executive (LCE) to a Department/Office of the LGU which authorizes it to incur obligations for a specific amount within its appropriation.

Obligation – the specific amount within the allotment which is committed to be paid by LGU for any lawful expenditure made by an accountable officer for and in behalf of the LGU concerned.

Expenditures are obligations that the government incurs that must be paid during or after the year when they were incurred.

The term ­expenditure­ is more generic than "expense" in that the latter refers to items of expenditure that are current. Expenditures are classified in various ways:

1. By expense class and object of expenditures;

2. By sector;

3. By recipient entities;

4. By region

Expense class refers to the classification of expenditures by the nature or type of obligation. There are four expense classes:

(a) Current Operating Expenditures (COE);

(b) Capital Outlays (CO);

c) Net Lending; and

(d) Debt Amortization.

Current Operating Expenditures (COE) – refer to appropriations for the purchase of goods and services for the conduct of normal local government operations within the fiscal year, including goods and services that will be used or consumed during the budget year.

These cover

1) Personal Services (PS) and

2) Maintenance and Other Operating Expenses (MOOE).

Personal Services (PS) refer to appropriations for the payment of salaries, wages and other compensation/benefits of permanent, temporary, contractual and casual employees of the local government unit.

​

Maintenance and Other Operating Expenses (MOOE) refers to recurring expenses to cover day-to-day requirements of the local government unit to carry out their regular operations.

Capital Outlays (CO) - refer to appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of the local government concerned, including investments in public utilities such as public markets and slaughterhouses.

This Photo by Unknown Author is licensed under CC BY

PLANNING & BUDGETING

PLANNING AND BUDGETING CYCLE

Local budget 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 avoid duplication in the use of fiscal and physical resources [Sec. 305 (h)]

Budget Principle

LDIP

AIP

PLAN

LINK

BUDGET

ANNUAL and

SUPPLEMENTAL

BUDGETS

DEVELOPMENT

PLANNING

(6-15 Years)

INVESTMENT

PROGRAMMING

​

BUDGETING

(1 Year)

PDPFP / CDP

P

L

A

N

​

B

U

D

G

E

T

​

L

I

N

K

​

M

O

D

E

L

(3-5 YEARS)

(1 YEAR slice� of LDIP)

- basic document linking the local development plan to the budget .

- contains a prioritized list of PPAs which are derived from the CDP.

- matched with financing resources

- to be implemented within a three to six-year period

Local Development Investment Program

(LDIP)

• annual slice of the Local Development Investment Program (LDIP) which constitutes the total resource requirements for all Program, Projects and Activities (PPAs)

Annual Investment Program (AIP)

Plan-Budget Link

Annual Investment Program as basis of budget preparation

This is pursuant to Section 305 (i) of RA 7160 which provides that “ Local budgets shall operationalize approved local development plans.”

The AIP Process Flow

LDC/LPDC/LBO

Local Sanggunian

LCE/LDC

Aligns Development Plan/ELA (PDPFP/CDP) with Current Development Issues

Updates AIP to consider new and unimplemented PPAs

Determines Annual Resource Requirements of Priority Development Projects from LDIP Funded from 20% of IRA, General Fund and Other Sources of Funds

Determine Resource Requirements of PPAs for Basic Services Delivery and Administrative/Legislative Services

Prepares Draft AIP and present to LCE for Review

LCE Presents AIP to LDC for Deliberation

LDC Deliberates on/Endorses AIP to Local Sanggunian

Approves AIP for the budget year

Column 8 to 11 – Estimated Cost

- Total cost of the PPAs broken down into PS, MOOE and CO.

​

For purposes of the AIP, the total PS and MOOE costs of a particular program or office, both line departments and administrative/legislative support services, shall represent the current operating costs for all regular activities. Costs which add to the fixed assets of the LGU are categorized as Capital Outlays.

0000-000-0-0-00-000-000-000

Sector (1000-General Public Services Sector, 3000-Social Services Sector, 8000 – Economic Sector, 9000 – Other Services Sector

Column 1 - AIP Reference Code

Sub-Sector (if any)

LGU level ( 1 – Province, 2 – City, 3 – Municipality))

Office Type ( 1 – Mandatory, 2 – Optional)

Office

Program

Project/Activity

Activity

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This Photo by Unknown Author is licensed under CC BY-ND

The LOCAL BUDGET PROCESS

LGU Budget Cycle

Appropriation Ordinance

Budget Operative or Inoperative

AIP�Executive Budget

Reporting;�Auditing

Project Implementation;�Releases; Disbursement

Accountability

Phases

Budget Preparation is an executive function pursuant to Section 318, RA 7160 which mandates the LCE to prepare the executive budget for the ensuing fiscal year.

The Local Budget Process

The Sanggunian shall enact, through an ordinance, the annual and supplemental budgets of LGUs (Sec. 319, RA 7160).

The Local Budget Process

The Sanggunian shall review the AOs of component cities, municipalities and barangays as the case maybe. While the DBM Regional Offices shall review the AOs of provinces (Sec. 326, 327, RA 7160)

The Local Budget Process

The responsibility for the execution of the annual and supplemental budgets and the accountability therefor shall be vested primarily in the LCE (Sec. 320, RA 7160). The Vice-LCE shall sign all warrants drawn on the treasury for all expenditures appropriated for the operation of the Sanggunian (Sec. 445(a)(1), 455(a)(1), 466(a)(1), RA 7160).

The Local Budget Process

The responsibility for the execution of the annual and supplemental budgets and the accountability therefor shall be vested primarily in the LCE (Sec. 320, RA 7160).

​

Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units (Sec. 305 (l), RA 7160).

The Local Budget Process

Budgetary

Requirements

Provision of no less than twenty (20%) of IRA for development projects

BUDGETARY REQUIREMENTS

(Section 287 of RA 7160)

Aggregate amount shall not exceed

estimates of income

BUDGETARY REQUIREMENTS

(Section 324 of RA 7160)

Full provision to all statutory and

contractual obligations

BUDGETARY REQUIREMENTS

(Section 324 of RA 7160)

Debt servicing should not exceed 20% of regular income

BUDGETARY REQUIREMENTS

(Section 324 of RA 7160)

PCM to provide not less than P1,000

per barangay

BUDGETARY REQUIREMENTS

(Section 324 of RA 7160)

5% of estimated revenue from regular

sources shall be set aside for LDRRMF

BUDGETARY REQUIREMENTS

(Section 324 of RA 7160)

1% of IRA for Local Council for the Protection of Children

BUDGETARY REQUIREMENTS

(Section 15 of RA 9344)

Other Budgetary

Requirements

OTHER BUDGETARY REQUIREMENTS

PPAs for nutrition

anti illegal drugs

OTHER BUDGETARY REQUIREMENTS

PPAs for culture and arts

OTHER BUDGETARY REQUIREMENTS

Integrated Coastal Management Programs

OTHER BUDGETARY REQUIREMENTS

Gender and Development

OTHER BUDGETARY REQUIREMENTS

Senior Citizens and Persons with Disabilities (PWDs)

OTHER BUDGETARY REQUIREMENTS

Combat Aids

OTHER BUDGETARY REQUIREMENTS

OTHER BUDGETARY REQUIREMENTS

Issuances to Address the Corona Virus Disease 2019 (COVID-19) Situation

Provision of Funds for COVID-19 PPAs)

Annual Investment Program (AIP)

20% Development Fund

20% Development Fund

Special Education Fund (SEF)

Special Education Fund (SEF)

Sangguniang Kabataan (SK) Fund

Bayanihan 2

Increase on Debt Service Ceiling and Exemption to Loan Ceiling Cap

Increase in the Personal Services (PS) Cap of LGUs for FY 2020

Realignment of LGU Funds

Release of the Remaining Shares of LGUs in National Wealth and National Tax Allotment

Financial Assistance/Subsidy to LGUs

Use of Special Education Fund (SEF)

Extension of the Term of Standby Loans Entered Into by the LGUs

Utilization of Unexpended Cash Balances of Public Funds Held in Trust by LGUs

Waiving all Permits, Licenses, Clearances and Registration Requirements for Infrastructure Flagship Projects Identified by the NEDA

Deadlines for the Payment of Local Taxes, Fees and Charges

Download budgetary issuances at

www.dbm.gov.ph

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