EIGHTEENTH CONGRESS OF THE REPUBLIC } 
OF THE PHILIPPINES 
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First Regular Session 
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S E N A T E  
Senate Bill No. 2 3
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Introduced by SENATOR LACSON
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AN ACT
INSTITUTING BUDGET REFORM THAT WILL ENSURE THE 
EQUITABLE DISTRIBUTION OF FUNDS FOR BOTH THE NATION \L  
AND LOCAL GOVERNMENT UNITS FOR THE PURPOSE OF 
PROMOTING VILLAGE EMPOWERMENT, ENABLING THEM TO BE 
AN EFFECTIVE INSTRUMENT IN ATTAINING INCLUSIVE GROWTH 
APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES ’
EXPLANATORY NOTE
The State recognizes the importance of budget reform measures for local 
government units (LGUs) to fully exercise their local autonomy in pursuit of robust 
development, sustained growth and good governance at the local level.
The State likewise underlines the policy for fiscal decentralization, as stated in 
Section 2(a), Chapter I, Title I of The Local Government Code, to wit:
“It is hereby declared the policy of the State that 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 strueture instituted 
through a system of decentralization whereby local government units shall be given more 
powers, authority, responsibilities, and resources. The process of decentralization shall 
proceed from the national government to the local government units.”
Thus, it is clear that the National Government shares its political-administrative 
authority with different local political subdivisions. 
Moreover, to emphasize the 
importance of LGUs' role in nation building, the National Government devolved some 
important governmental functions to the local level, i.e. environment, public health, 
infrastructure, among others.
While LGUs are equal partners of the National Government in promoting the 
welfare and well-being of the people, there are existing gaps that need to be addressed, 
among which is the measly sum of LGU share in the National Budget. For Fiscal Year 
2018 General Appropriations Act (GAA) enacted through Republic Act 10964, LGU 
shares, through the Allocation to Local Government Units and Internal Revenue 
Allotment, amount to only P581.1 billion. This translates to a mere 15% of the P3.767 
trillion national budget.


Noteworthy is the fact that some, if not all, of these National Government Agencies 
with huge annual appropriations have been remiss in their responsibilities of delivering 
basic services and contributing to national development due to massive underspending to 
the detriment of the Filipino people. From year 2010 to 2017, the annual average of 
unused appropriations is P343.8 billion pesos. In 2017 alone, unused appropriations 
amount to a staggering P388.4 billion, which translates to 10.5% of the P3 7 trillion 
Available Appropriations for Fiscal Year 2017.
u A 
TJhUS’-/t 18 the intentl0n of this proposal to institutionalize rational and equitable 
buM ngdlStribUtl0n f0r LGU deveIopment for them t0 be active participants in nation
^ 
Under the proposal, the amount allocated to the LGUs will be referred to as the 
Local Development Fund (LDF)”, which will be divided among tlie different political 
subdivisions solely for developmental projects, activities and programs (PAPs) based on 
meir approved Comprehensive Development Plans (CDPs).
The CDPs will be subject to annual review of a committee created for the purpose 
of determining if the LGUs’ entitlements to the said fund will be reduced or retained 
based on their compliance with their respective plans.
It is also recognized that LGUs must have adequate capacity to carry out their 
mandate for the proper implementation ot the LDFs. Capacity building will enhance local 
governance. Improve delivery of public service, and strengthen accountability among 
ocal governments. These are important in effectively carrying out devolved flinctions 
and ultimately, attaining local autonomy.
Hence, adequate fiinds shall be appropriated mandating the Local Government 
Academy (LGA) to provide the LGUs with the necessary tools in undertaking effective 
planning and proper implementation of their PAPs in accordance witli their approved 
CDPs •
By giving the LGUs the necessary wherewithal to be active participants in the 
development of our country, we will end the culture of mendicancy and political 
patronage that viciously thrive in our system. Ultimately, this will help us realize the 
elusive inclusive growth that we all aspire for as a nation.
It is for this purpose that the approval of this bill is earnestly sought.
: h
PANni/CKM. *La c s o n
Senator


EIGHTEENTH CONGRESS OF THE REPUBLIC } 
OF THE PHILIPPINES 
}
First Regular Session 
j
S E N A T E  
Senate Bill No. 23
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-IS—JUU=J—Alo -49
Introduced by SENATOR LACSON
INSTITUTING BUDGET REFORM THAT WILL ENSURE THE 
EQUITABLE DISTRIBUTION OF FUNDS FOR BOTH THE NATIONAL 
AND LOCAL GOVERNMENT UNITS FOR THE PURPOSE OF 
PROMOTING VILLAGE EMPOWERMENT, ENABLING THEM TO BE 
AN EFFECTIVE INSTRUMENT IN ATTAINING INCLUSIVE GROWTH 
APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES
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Be it enacted by the Senate and House of Representatives of the Philippines 
in Congress assembled:
SECTION. 1. Short Title. - This Act shall be known as the "THE BUDGET 
REFORM FOR VILLAGE EMPOWERMENT ACT OF 2019."
SECTION. 2. Declaration of Policy. -
(a) 
It is a declared policy of the State that territorial and political 
subdivisions 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;
(b) 
It is also the policy of the State that meaningful local autonomy can 
only be realized through the implementation of locally crafted 
development plans that accurately acknowledge and address 
perceived local needs;
(c) 
The State acknowledges that there exists a fiscal gap between the
expenditure responsibilities of the Local Government Units (LGUs) 
and their fiscal capacity;
(d) 
It is likewise the policy of the State to ensure that sufficient financial
resources for development are available to LGUs with corresponding 
accountability of improving public services;


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(e) 
Therefore, the State recognizes that inclusive and sustainable growth 
can be truly achieved only by providing the LGUs with adequate 
resources and technical capacities that will promote meaningful 
development.
SECTION. 3. Allotment fo r Development. - To achieve the policies 
declared in this Act, the National Government shall guarantee an annual fund 
sufficient to implement the three-year Comprehensive Development Plan (CDP) 
of each and every province, city, municipality, and barangay herein referred to as 
the "Local Development Fund" (LDF), to wit:
(a) Provinces -  Five Ffundred Million Pesos to One Billion Pesos 
(P500,000,000.00 to P 1,000,000,000.00) per province per year;
(b) Cities -  One Hundred Million Pesos to Two Flundred Million Pesos 
(P100,000,000.OOto P200,000,000.00) per city per year;
(c) Municipalities -Fifty Million Pesos to One Flundred Million Pesos 
(P50,000,000.00 to P I00,000,000.00) per municipality per year; and,
(d) Barangays -Three Million Pesos to Five Million Pesos (P3,000,000.00 
to P5,000,000.00) per barangay per year.
Provided that, the amount of LDF for each province, city or municipality 
shall be based on the following criteria:
a) 50% of the prescribed amount for each 1st class LGU;
b) 60% of the prescribed amount for each 2nd class LGU;
c) 70% of the prescribed amount for each 3 rd class LGU;
d) 80% of the prescribed amount for each 4th class LGU;
e) 90% of the prescribed amount for each 5 th class LGU; and
f) 100% of the prescribed amount for each 6th class LGU;
Provided, further. That each barangay shall, at all times, receive the full 
amount of LDF prescribed above.
In the allotment of the LDF, Fiscal capacity, expenditure responsibilities 
and poverty incidence shall be taken into consideration.
These funds shall be automatically and directly released to every LGU at 
the start of the fiscal year or on quarterly basis within five (5) days at the start of 
each quarter. No lien, holdback or any other imposition, of whatever nature, may 
be imposed by the National Government against the said fund.


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SECTION. 4. Purpose of Local Development Fund. -  The fund shall be 
used solely by the LGUs to finance their respective development projects, 
activities and programs (PAPs) identified in their approved Comprehensive Local 
Development Plans (CDPs). ; Provided, That no less than ten percent (10%) of the 
LDF shall be allotted to PAPs geared towards the enhancement and promotion of 
technical skills training of the citizens in the concerned LGU. The use of the said 
fund contrary to the stated purpose shall make the approving authority and all 
persons who allow such diversion liable for technical malversation as defined and 
penalized under Article 220 o f Act No. 3815, othemise known as the "Revised 
Penal Code".
SECTION. 5. Expenditures Not Covered. - No amount shall be paid out 
of the LDF to items that are not related to or connected with the development 
PAPs such as:
(a) Administrative expenses such as cash gifts, bonuses, food allowance, 
medical assistance, uniforms, supplies, meetings, communication, water 
and light, petroleum products and tlie like;
(b) Salaries, wages, emoluments, per diems or overtime pay;
(c) Travelling expenses, whether domestic or foreign;
(d) Registration or participation fees in trainings, seminars, conferences and 
conventions;
(e) Construction, repair or refinishing of administrative offices;
(f) Purchase of administrative office’s furniture, fixtures, equipment or 
appliances;
(g) Purchase, maintenance or repair of motor vehicles or motorcycles.
Likewise, the LDF shall not be used to finance PAPs that may duplicate or
overlap with PAPs that are being implemented or funded by the National 
Government Agencies (NGAs). Also, no LDF shall be utilized as a counterpart 
fund :o support NGAs’ identified PAPs.
SECTION. 6. Comprehensive Local Development Plan. -  Consistent with 
Republic Act 7160, othenvise known as the "'Local Government Code of 1991", 
every LGU shall formulate a three-year CDP that is reflective of and responsive to 
the developmental needs of their respective localities with corresponding periodic 
timelines. The approved CDPs shall be funded yearly by the National Government


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in accordance with Section 3 hereof. The projects funded shall be identified in the 
Annual General Appropriations Act.
The Local Development Councils shall conduct an annual review, and if 
necessary, update AND IMPROVE their respective CDPs. The CDPs shall be 
formulated and approved in accordance with the provisions of Republic Act 7160.
The approved CDPs of each LGU shall be the basis for the allocation of the 
Local Development Fund. In the event that the CDP is updated and funding has 
been re-adjusted, the affected development project should first be approved before 
it may be funded and implemented.
Consultations with all stakeholders shall be done at all stages of the 
formulation, review, updating, or improvement of the CDP.
SECTION. 7. Performance-based Evaluation. -  A performance-based 
evaluation shall be conducted by the Oversight Evaluation Committee (OEC) 
chaired by the Undersecretary for Local Government of the Department of Interior 
and Local Government (DILG). Before the end of the fourth quarter of the year, 
said committee shall conduct an annual performance review of the LGUs' 
implementation of their development PAPs based on the indicators identified in
their CDPs. The results shall be published before the end of the first quarter of the 
following year.
Unsatisfactory performance of an LGU shall result in the reduction of its 
LDP by fifty percent (50%) in the following year after the said evaluation; 
Provided however. That, when the LGU which was previously rated with poor 
standing improves on its performance in the next evaluation period, full funding 
shall be restored; Provided further. That, LDF shall be terminated in case of two 
(2) consecutive unsatisfactory performance; Provided finally. That, LGUs, whose 
LDF has been terminated, may reapply for funding of their CDPs a year following 
its termination.
SECTION. 8. Web-based Monitoring System. -  
In the spirit of 
transparency and accountability, the OEC shall adopt a web-based application to 
facilitate the monitoring and evaluation of all PAPs funded by the LDF. The 
system shall allow tracking of expenditures and the status of implementation of the 
PAPs. The status of the PAPs shall be updated monthly by the LGUs or as 
frequently as maybe necessary. It is the responsibility of the Chief Executive of 
the LGU to make sure that the reportorial requirements are complied with. In case


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of non-reporting or failure to eomply with the reportorial requirements, the OEC 
shall advise the Department of Budget and Management (DBM) to suspend the 
release of funding to the delinquent LGU until such time that it complies with the 
requirements. The system shall be accessible to the general public and all 
information, including but not limited to flinding/cost, location, contractor, 
progress status, number of beneficiaries, date of completion and responsible 
government official, of the PAPs shall be disclosed.
The amount of One Hundred Million Pesos (PI00,000,000.00) is hereby 
appropriated to fund the establishment of a web-based monitoring system.
To enhance the monitoring of PAPs, the Strategic Action and Response 
(STAR) and the Office of Participatory Governance, both under the Office of the 
Cabinet Secretary, shall provide the following support:
a. 
Promote 
active 
citizenship, 
inclusiveness, 
transparency 
and
accountability; and.
b. Conduct public awareness campaign on reform for the Governments’ 
development PAPs in the localities.
SECTION. 9. Oversight Evaluation Committee. - There is hereby created 
a Oversight Evaluation Committee in charge of the monitoring and evaluation of 
the implementation of development PAPs under the LDF based on the indicators 
provided under the CDPs, composed of the following:
1. The Undersecretary for Local Government of the DILG, as Chairman;
2. An Undersecretary from the Offiee of the Cabinet Secretary;
3. The Undersecietary for Regional of the National Economic and 
Development Authority (NEDA);
4. The Undersecretary for Local Government and Regional Operations Group 
of the DBM;
5. The Executive Director of the Bureau of Local Government Finance 
(BLGF) oftlie Department of Finance (DOF);
6. A representative from each of the various leagues of the different LGUs 
concerned;
7. The Chairperson the National Commission on Indigenous Cultural 
Communities/Indigenous Peoples (NCIP), if applicable; and.


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8. Four representatives from accredited civii society groups and/or non-
government organizations in the locality where the CDP is to be
implemented.
The representatives from the accredited civil society groups and/or non­
government organizations shall be selected based on the criteria and mechanisms 
to be determined for this purpose by the OEC. Civil Society Groups and/or non- 
government organizations who has a member that is related by sixth degree of
consanguinity or affinity to any elected officials in the locality shall not be 
accredited.
The various Regional Project Monitoring Committees (RPMC) shall assist
the OEC in its task of monitoring and evaluation and shall act as the secretariat of 
the OEC with respect to their region.
The OEC may create a Technical and Support Unit under its direct control 
and supervision but within the administrative structure of the DILG.
SECTION. 10. Capacity Building. -  The Local Government Academy 
(EGA), in consortium and/or partnership with academic institutions of higher 
learning and/or state university/ies with distinguished competencies in public 
governance programs, shall establish a continuing capacity program for all LGUs. 
Trainings or programs conducted by such academic institutions of higher learning 
and/cr state university/ies may be considered for academic credits.
The EGA is mandated to ensure, within one (1) year after the effectivity of 
this Act, that all territorial and political subdivisions are capacitated to effectively 
plan and implement the development projects in their respective CDPs.
For this purpose, the amount of One Billion Pesos (PI,000,000,000.00) is 
hereby appropriated for capacity building of all LGUs.
The EGA shall provide options and/or lists of development PAPs to guide 
the LGUs.
No Local Development Fund shall be released without a certification from 
the EGA that the LGU is capacitated to plan and implement its CDP.
SECTION. 
11. Procurement. -  Procurement for the purpose of 
implementing the CPDs must be consistent with the provisions of Republic Act 
9184, otherwise known as “Government Procurement Reform Act".
SECTION. 12. Penal Provision —


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a) It shall be unlawful for any person to withhold the release of the LDF to 
the LGUs within the period specified in Section 3 hereof Any person violating the 
provision of this law shall suffer the penalty of imprisonment ranging from one 
year and one day to six years (1 year and 1 day to 6 years), and a fine of five 
hundred thousand pesos (P500,000.00), and temporary absolute disqualification 
from holding any public office or employment in the government, including any
Government-Owned 
and/or Controlled 
Corporations 
(GOCCs), 
and their 
subsidiaries.
b) The Local Chief Executive shall be administratively liable, without 
prejudice to any civil or criminal liabilities he may have incuiTed under existing
laws, in case of failure to report the status of their development PAPs as required 
under Section 8 of this Act.
c) Any government official or employee who shall prevent the reporting or 
disclosure of any information or data pertaining to a fiinded development PAP as 
mandated by Section 8 of this Act, shall be held administratively liable without
prejudice to any civil or criminal liability he may have incuired under existing 
laws.
SECTION. 
13. Oversight Committee. There is hereby created a 
Congressional Oversight Committee to monitor and oversee the implementation of 
the provisions of this Act. The Committee shall be composed of five (5) members 
from the Senate and five (5) members from the House of Representatives to be 
chaired by the Chairpersons of the Committee on Local Government from both the 
Senate and House of Representatives.
SECTION. 14. Sunset Review. Five (5) years following the effectivity of 
this Act, or as the need arises; the Congress shall conduct a sunset review. For 
purposes of this Act, the term “sunset review” shall mean a systematic evaluation 
by Congress of the accomplishments and impact of this Act, as well as the 
performance of LGUs, for purposes of determining remedial legislation.
SECTION. 15. Impiementing Rules and Regulations. -  For the effective 
implementation of this Act, the Secretary of the DILG, with the Secretaries of the 
DOF and the DBM and in consultation with the various leagues of the different 
LGUs, shall issue the necessary Implementing Rules and Regulations.


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SECTION. 16. Slipplelory Application o/ £ vk»V>5 L«lra. - The provisions 
of Republic Act No. 7160, otherwise known as the "Local Government Code of 
1991", and other laws consistent witli this Act shall have suppletoiy effect.
SECTION. 17. Repealing Clause. - All laws, presidential decrees, 
executive orders, presidential proclamations, rules and regulations or parts thereof
contrary to or inconsistent with this Act are hereby repealed, superseded or 
modified accordingly.
SECTION. 18. Separability Clause. - Any portion or provision of this Act 
that may be declared unconstitutional or invalid shall not have the effect of 
nullifying other portions or provisions hereof, as long as such remaining portions 
or provisions can still subsist and be given effect in their entirety.
SECTION. 19. Effectivity. - This Act shall take effect fifteen (15) days 
after its complete publication in the Official Gazette or in at least two (2) 
newspapers of general circulation.
Approved,