SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
Second Regular Session )
SENATE
S.B.No._ 17°70

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE PUBLIC FINANCIAL MANAGEMENT IN LOCAL GOVERNMENT
UNITS BY AMENDING CERTAIN PROVISIONS IN REPUBLIC ACT 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

EXPLANATORY NOTE

Over the nearly three decades that the Local Government Code (R.A. 7160) has
been in place and implemented, the importance of efficient and effective local public
financial management has risen with the intensifying complexity of local governance
and service delivery.

LGUs have realized that to significantly reduce local poverty and provide basic
services to their communities in a sustained and sustainable manner, they can no
longer rely simply on year-to-year planning and budgeting. There is a need to shift
from short-term public financial management to medium and long-term public
financial management. And LGUs will clearly need guidance from the national
government agencies to achieve this.

To improve public financial management at the local level, there is a need to
provide oversight and guidance that is not only timely, relevant and effective but also
respectful of the principles of local autonomy. The latter is critical because as the
country considers a shift to federalism at some future time, LGUs will have to play a
much bigger role than they've previously held.

There is also a need to harmonize and complement if not integrate local public
investment with national public investment. Again, this only highlights the need to
enhance the capacity of LGUs for public financial management


With this in mind, this bill mandates oversight national agencies—the Department
of the Interior and Local Government (DILG), the Department of Budget and
Management (DBM), the Department of Finance (DOF) and the National Economic
and Development Authority (NEDA) to provide guidance in matters regarding local
public financial management (PFM). LGUs are then mandated to incorporate
whatever guidance provided by said oversight national agencies with their PFM
activities.

PFM includes but is not limited to planning, investment programming, budgeting,
revenue mobilization and administration, expenditure management, performance
monitoring and management,

This bill emphasizes the oversight role of the Regional Development Council and
the Province, City and Municipal governments over their respective component
LGUs in matters regarding PFM. Finally, this bill encourages harmonization and
complementarity if not integration between local plans and investment programs and
national plans and investment programs.

In view of the foregoing, approval of this bill is earnestly requested

SONNY ANGARA



SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES
Second Regular Session ) or

PR -3 P1555

SENATE RECEN.U 5 “a __

S.B.No. 1770

Introduced by Senator SONNY ANGARA

AN ACT
TO ENHANCE PUBLIC FINANCIAL MANAGEMENT IN LOCAL GOVERNMENT
UNITS BY AMENDING CERTAIN PROVISIONS IN REPUBLIC ACT 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Section 3 of Republic Act No. 7160, otherwise known as the
Local Government Code of 1991, hereinafter referred to as the “Code”, is hereby
amended to read as follows:

“SEC. 3. Operative Principles of Decentralization. - The formulation and
implementation of policies and measures on local autonomy shall be guided
by the following operative principles

(a) xxx

XXX

(e) Provinces with respect to component cities and municipalities, and cities
and municipalities with respect to component barangays, shall ensure that the
acts of their component units are within the scope of their prescribed powers
and functions AND ADHERE TO THE PRINCIPLES AND POLICIES OF
GOOD GOVERNANCE AND EFFICIENT PUBLIC FINANCIAL
MANAGEMENT;

(xxx

XXX



-

raw

() Effective mechanisms for ensuring the accountability of local government
units to their respective constituents shall be strengthened in order to upgrade
continually the quality of local leadership AND ADVANCE THE PRINCIPLES
AND POLICIES OF GOOD GOVERNANCE AND EFFICIENT PUBLIC
FINANCIAL MANAGEMENT;

(k) xxx

Xxx"

SEC. 2. Section 25 (a) of the Code is hereby amendment to read as follows:

“SEC. 25. National Supervision over Local Government Units. - (a)
Consistent with the basic policy on local autonomy, the President shall
exercise general supervision over local government units to ensure that their
acts are within the scope of their prescribed powers and functions AND THE
PRACTICE OF GOOD GOVERNANCE AND EFFICIENT PUBLIC
FINANCIAL MANAGEMENT. THE PRESIDENT SHALL INSTRUCT THE
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, THE
DEPARTMENT OF FINANCE, THE DEPARTMENT OF BUDGET AND
MANAGEMENT AND THE NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY TO FORMULATE GUIDELINES AND DESIGN AND DEVELOP
PROCESSES AND SYSTEMS TO FACILITATE THIS SUPERVISION.

The President shall exercise supervisory authority directly over
provinces, highly urbanized cities, and independent component cities; through
the province with respect to component cities and municipalities; and through
the city and municipality with respect to barangays.

(b) xxx

Xxx"

SEC. 3. Section 29 of the Code is hereby amended to read as follows:

“SEC. 29. Provincial Relations with Component Cities and Municipalities.
— The province, through the governor, shall ensure that every component city
and municipality within its territorial jurisdiction acts within the scope of its
prescribed powers and functions AND ADHERES TO THE PRINCIPLES



AND POLICIES OF GOOD GOVERNANCE AND EFFICIENT PUBLIC
FINANCIAL MANAGEMENT. THE DEPARTMENT OF THE INTERIOR AND
LOCAL GOVERNMENT, THE DEPARTMENT OF FINANCE, THE
DEPARTMENT OF BUDGET AND MANAGEMENT AND THE NATIONAL
ECONOMIC AND DEVELOPMENT AUTHORITY SHALL FORMULATE
GUIDELINES AND DESIGN AND DEVELOP PROCESSES AND SYSTEMS
TO SUPPORT THE OVERSIGHT FUNCTION OF THE PROVINCE. Highly
urbanized cities and independent component cities shall be independent of

the province.”

SEC. 4. Section 32 of the Code is hereby amended to read as follows:

“SEC. 32. City and Municipal Supervision over Their Respective
Barangays. — The city or municipality, through the city or municipal mayor
concemed, shall exercise general supervision over component barangays to
ensure that said barangays act within the scope of their prescribed powers
and functions AND ADHERES TO THE PRINCIPLES AND POLICIES OF
GOOD GOVERNANCE AND EFFICIENT PUBLIC FINANCIAL
MANAGEMENT. THE DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, THE DEPARTMENT OF FINANCE, THE DEPARTMENT
OF BUDGET AND MANAGEMENT AND THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY SHALL FORMULATE GUIDELINES AND
DESIGN AND DEVELOP PROCESSES AND SYSTEMS TO SUPPORT THE
EXERCISE OF THIS SUPERVISION BY THE CITY AND MUNICIPALITY
OVER THE BARANGAYS.”

SEC. 5. Section 108 of the Code is hereby amended to read as follows:

“SEC. 108. Representation of Non-governmental Organizations. — Within
a period of sixty (60) days [from] PRIOR TO the start of organization of local
development councils, the non-governmental organizations shall choose from
among themselves their representatives to said councils. WITHIN THE SAME
SIXTY (60) DAY PERIOD, [F] the local sanggunian concerned shalll accredit
non-governmental organizations subject to such criteria as may be provided



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by law AND GUIDELINES PREPARED BY THE DEPARTMENT OF THE
INTERIOR AND LOCAL GOVERNMENT AND THE DEPARTMENT OF
BUDGET AND MANAGEMENT. THE SELECTION PROCESS SHALL BE
CONDUCTED ONCE EVERY THREE (3) YEARS TO ENSURE THAT THE
NON-GOVERNMENTAL ORGANIZATIONS REPRESENTED IN THE
LOCAL DEVELOPMENT COUNCIL ARE CURRENTLY ACTIVE AND TO
EXPAND AND IMPROVE THE COVERAGE OF COMMUNITY ISSUES AND
CONCERNS.”

SEC. 6. Section 109 of the Code is hereby amended to read as follows:

“SEC. 109. Functions of Local Development Councils. —
(a) The provincial, city, and municipal development councils shall exercise the
following functions:
(1) Formulate COMPREHENSIVE long-term, medium-term, and annual
socio-economic development plans and policies;
(2) Formulate the medium-term and annual public investment programs;
(3) Appraise and prioritize socio-economic [development] MEDIUM-TERM
AND ANNUAL PUBLIC INVESTMENT programs and projects;
(4) Formulate local investment incentives to promote the inflow and
direction of private investment capital;
(5) Coordinate, monitor, and evaluate the implementation of [development]
MEDIUM-TERM AND ANNUAL PUBLIC INVESTMENT programs and
projects; and
(6) Perform such other functions as may be provided by law or component

authority.

(b) The barangay development council shall exercise the following functions:
(1) Mobilize people's participation in local development efforts;
(2) Prepare barangay development plans based on local requirements;
(3) Monitor and evaluate the implementation of national or local programs
and projects; and
(4) Perform such other functions as may be provided by law or competent

authority



6

(C) THE DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT,
THE DEPARTMENT OF FINANCE, THE DEPARTMENT OF BUDGET AND
MANAGEMENT AND THE NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY SHALL ISSUE MANUALS AND RELATED ISSUANCES TO
GUIDE THE LOCAL DEVELOPMENT COUNCILS OF THE PROVINCE,
MUNICIPALITY, CITY AND BARANGAY IN THE PREPARATION OF THEIR
MEDIUM-TERM COMPREHENSIVE LOCAL DEVELOPMENT PLANS AND
MEDIUM-TERM AND ANNUAL PUBLIC INVESTMENT PROGRAMS.

SEC. 7. Section 113 of the Code is hereby amended to read as follows:

“SEC. 113. Secretariat. - There is hereby constituted for each local
development council a secretariat which shall be responsible for providing
technical support, documentation of proceedings, preparation of reports and
such other assistance as may be required in the discharge of its functions.
The local development council may avail of the services of any non-
governmental organization or educational or research institution for this
purpose.

The secretariats of the provincial, city, and municipal development
councils shall be headed by their respective planning and development
coordinators WITH THEIR RESPECTIVE TREASURERS, BUDGET
OFFICERS AND ACCOUNTANTS AS MEMBERS. The secretariat of the
barangay development council shall be headed by the barangay [secretary]
TREASURER who shall be assisted by the BARANGAY SECRETARY AND
ADVISED BY THE city or municipal planning and development coordinator

concerned.”

SEC. 8. Section 114 of the Code is hereby amended to read as follows:

“SEC. 114. Relation of Local Development Councils to the Sanggunian
and the Regional Development Council. ~

(a) The policies, programs, and projects proposed by local development
councils shall be submitted to the sanggunian concerned for appropriate



1 action. The COMPREHENSIVE local development plans approved by their
respective sanggunian [may] SHOULD be [integrated] ALIGNED with the

3 development plans of the next higher level of local development council.
4 (b) xxx"

5 SEC. 9. Section 316 of the Code is hereby amended to read as follows:

6 “SEC. 316. Local Finance Committee. - There is hereby created in every
7 province, city or municipality a local finance committee to be composed of the
8 local planning and development officer, the local budget officer, [and] the local
9 treasurer, AND THE LOCAL ACCOUNTANT.

10 Xxx"

Ml SEC. 10. Section 319 of the Code is hereby amended to read as follows:

12 “SEC. 319. Legislative Authorization of the Budget. — On or before the
13 end of the current fiscal year, the sanggunian concerned shall, through an
14 ordinance, the annual budget of the local government unit for the ensuing
15 fiscal year on the basis of the estimates of income and expenditures
16 submitted by the local chief executive AND THE APPROVED ANNUAL
17 INVESTMENT PROGRAM WHICH IS THE ENSUING YEAR SLICE OF THE
18 MEDIUM-TERM PUBLIC INVESTMENT PROGRAM.”

19 SEC. 11. Section 324 of the Code is hereby amended to read as follows:

20 “SEC. 324. Budgetary Requirements. — The budgets of local government
21 units for any fiscal year shall comply with the following requirements:

22 (a) | The aggregate amount appropriated shall not exceed the estimates of
23 income AND THE ANNUAL INVESTMENT PROGRAM WHICH IS THE
24 ENSUING YEAR SLICE OF THE MEDIUM-TERM PUBLIC INVESTMENT
25 PROGRAM;

26 (b) xxx

27 xXx"


1 SEC. 12. Section 352 of the Code is hereby amended to read as follows:

2 “SEC. 352. Posting of the Summary of Income and Expenditures. ~ Local
3 treasurers, accountants, budget officers, and other accountable officers shall,
4 within thirty (30) days from the end of the fiscal year, post in at least three (3)
5 publicly accessible and conspicuous places in the local government unit OR
6 THE OFFICIAL WEBSITE OF THE LOCAL GOVERNMENT UNIT, IF
7 AVAILABLE, AND THE OFFICIAL WEBSITE OF THE BUREAU OF LOCAL
8 GOVERNMENT FINANCE OF THE DEPARTMENT OF FINANCE, OR AN
9 OFFICIAL GOVERNMENT WEBSITE DESIGNATED BY THE BUREAU OF

10 LOCAL GOVERNMENT FINANCE OF THE DEPARTMENT OF FINANCE
ll FOR SUCH PURPOSE a summary of all revenues collected and funds
received including the appropriations and disbursements of such funds during

13 the preceding fiscal year.”

14 SEC. 13. Section 513 of the Code is hereby amended to read as follows:

Is “SEC. 513. Failure to Post and Publish the Itemized Monthly Collections
16 and Disbursements. — Failure by the local treasurer of the local chief
7 accountant to post the itemized monthly collections and disbursements of the
18 local government unit concerned within ten (10) days following the end of
19 every month and for at least two (2) consecutive weeks at prominent places in
20 the main office building of the local government unit concerned, its plaza and
21 main street, and to publish said itemization in a newspaper of general

circulation, where available, in the territorial jurisdiction of such unit OR THE
OFFICIAL WEBSITE OF THE LOCAL GOVERNMENT UNIT, IF

24 AVAILABLE, AND THE OFFICIAL WEBSITE OF THE BUREAU OF LOCAL
25 GOVERNMENT FINANCE OF THE DEPARTMENT OF FINANCE, OR AN
26 OFFICIAL GOVERNMENT WEBSITE DESIGNATED BY THE BUREAU OF
27 LOCAL GOVERNMENT FINANCE OF THE DEPARTMENT OF FINANCE

28 FOR SUCH PURPOSE shall be punished by a fine not exceeding Five
7



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hundred pesos (P500.00) or by imprisonment not exceeding one (1) month, or
both such fine and imprisonment, at the discretion of the court.”

SEC. 14. Repealing Clause. - All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Act are hereby
repealed or modified accordingly.

SEC. 15. Separability Clause. - If, for any reason or reasons, any part of
provision of this Act shall be held unconstitutional or invalid, other parts or provisions

hereof which not affected thereby shall continue to be in full force and effect.

SEC. 16. Effectivity Clause. - This Act shall take effect fifteen (15) days after
its publication in the Official Gazette or in a newspaper of general circulation.

Approved,