EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE
S. B. NO. 352
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RECEiVtD DV
Introduced by SENATOR JOEL VILLANUEVA
AN ACT ENSURING THE EQUITABLE DISTRIBUTION OF 
FUNDS BETWEEN THE NATIONAL GOVERNMENT AND THE 
LOCAL GOVERNMENT UNITS, APPROPRIATING FUNDS 
THEREFOR AND FOR OTHER PURPOSES
EXPLANATORY NOTE
Republic Act No. 7160 or the Local Government Code of 1991 (LGC) 
sought to empower local government units (LGUs) by giving them the 
authority to effectively formulate and implement their respective projects and 
programs. To this end, the LGC increased the share of LGUs from the annual 
revenues of the national government by giving them a share on the taxes 
collected by the national government through the distribution of Internal 
Revenue Allotment (IRA). 
In addition, the LGC also authorized LGUs to 
impose and collect local fees and taxes to generate additional resources. 
These reforms sought to empower LGUs and enable them to fund their 
respective programs -  consistent with the national objective of creating 
effective and autonomous local governments units.
Nevertheless, despite the said reforms, many LGUs continue to suffer 
from limited fiscal resources. Consequently, many LGUs fail to effectively 
provide service and implement their respective programs, contrary to the 
outcomes envisioned when the LGC was enacted in 1991. To date, many 
LGUs continue to rely on direct provision from the national government, 
especially for programs and projects that contribute to local development.
To address the issue of scarce resources faced by many LGUs, this bill 
seeks to provide additional funding for local governments by giving each 
barangay, municipality, city, and province a Local Development Fund (LDF). 
The LDF seeks to supplement the resources currently available to local


governments, and ensures the availability of adequate funding for programs, 
project, and activities that will assist in the development of LGUs. The bill also 
mandates that at least 10% of the LDF shall be utilized for programs geared 
towards the enhancement and promotion of technical skills training and 
education.
This bill also seeks to allot more funds to lower-income LGUs 
compared to their higher-income counterparts to strengthen the equitable 
distribution of resources across the country. In addition, this bill also provides 
for various safeguards (e.g. compliance with local development plan, local 
capacity-building, multi-sectoral monitoring and evaluation, etc.) to ensure that 
resources are used consistent with their intended purpose.
The immediate passage of this bill is earnestly sought.
SENATOR J^E L VILLANUEVA


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE 
S. B. NO. 3°52
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RECEIVLD Ci 
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Introduced by SENATOR JOEL VILLANUEVA
AN ACT ENSURING THE EQUITABLE DISTRIBUTION OF FUNDS 
BETWEEN THE NATIONAL GOVERNMENT AND THE LOCAL 
GOVERNMENT UNITS, APPROPRIATING FUNDS THEREFOR AND
FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
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SECTION. 1. Short Title. -  This Act shall be known as the "Local Budgeting
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Reform Act."
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SEC. 2. Declaration of Policy. -  The State and all its territorial and political
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subdivisions shall enjoy genuine and meaningful local autonomy to enable
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them to attain their fullest development as self-reliant communities and make
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them more effective partners in the attainment of national goals. 
For this
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purpose, the State recognizes that meaningful local autonomy can only be
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realized through the implementation of locally crafted development plans that
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accurately acknowledge and address perceived local needs, and that
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inclusive and sustainable growth can only be truly achieved by providing the
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local government units (LGUs) with adequate resources and technical
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capacities that will promote meaningful development.
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SEC. 3. Allotment for Development. -  To achieve the policies declared in
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this Act, the National Government shall guarantee an annual fund sufficient to
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implement the three-year Comprehensive Development Plan (CDP) of each
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province, city, municipality, and barangay, herein referred to as the “Local
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Development Fund" (LDF), to wit:
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a) Provinces -  Fifty Million Pesos to One Hundred Million Pesos
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(P50,000,000.00 to P100,000,000.00) per province per year;


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b) Cities -  Ten Million Pesos to Twenty Million Pesos (PI 0,000,000.00 to
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P20,000,000.00) per city per year;
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c) Municipalities -  Five Million Pesos to Ten Million Pesos (P5,000,000.00
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to P10,000,000.00) per municipality per year; and
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d) Barangays -  One Million Pesos to Three Million Pesos (P1,000,000.00
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to P3,000,000.00) per barangay per year.
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Provided, That the amount of LDF for each province, city or municipality shall
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be based on the following criteria:
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a) 50% of the prescribed amount for each 1st class LGU;
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b) 60% of the prescribed amount for each 2nd class LGU;
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c) 70% of the prescribed amount for each 3rd class LGU;
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d) 80% of the prescribed amount for each 4th class LGU;
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e) 90% of the prescribed amount for each 5,h class LGU; and
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f) 100% of the prescribed amount for each 6th class LGU;
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Provided, further, That each barangay shall, at all times, receive the full
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amount of LDF prescribed above.
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These funds shall be automatically and directly released to every LGU at the
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start of every fiscal year or on quarterly basis within five (5) days at the start of
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each quarter. No lien, holdback or any other imposition, of whatever nature.
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may be imposed by the National Government against the LDF.
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SEC. 4. Purpose of Local Development Fund. -  The LDF shall be used
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solely by the LGUs to finance their respective development projects, activities
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and programs (PAPs) identified in their approved GDPs; Provided, That no
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less than ten percent (10%) of the LDF shall be allotted to PAPs geared
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towards the enhancement and promotion of technical skills training of the
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citizens in the concerned LGU.
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The use of the LDF contrary to the stated purpose shall make the approving
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authority and all persons who allow such diversion liable for technical
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malversation as defined and penalized under Article 220 of Act No. 3815,
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otherwise known as the “Revised Penal Code.”
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SEC. 5. Expenditures Not Covered. -  No amount shall be paid out of the
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LDF to items that are not related to or connected with the development PAPs,
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such as:
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a) Administrative expenses, such as cash gifts, bonuses, food allowance,
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medical assistance, uniforms, supplies, meetings, communication,
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water and light, petroleum products and the like;
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b) Salaries, wages, emoluments, per diems or overtime pay;
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c) Travelling expenses, whether domestic or foreign;


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d) Registration or participation fees in trainings, seminars, conferences 
and conventions, except if such disbursement is for technical skills 
training as provided under Section 4 above;
e) Construction, repair or refinishing of administrative offices;
f) Purchase of administrative office’s furniture, fixtures, equipment or 
appliances; or
g) Purchase, maintenance or repair of motor vehicles or motorcycles.
The LDF shall not be used to finance PAPs that may duplicate or overlap with 
PAPs that are being implemented or funded by National Government 
Agencies (NGAs). No LDF shall also be utilized as a counterpart fund to 
support NGAs’ identified PAPs.
SEC. 6. Comprehensive Local Development Plan. — Consistent with 
Republic Act No. 7160, otherwise 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 in accordance with Section 3 hereof.
The Local Development Councils shall conduct an annual review of, and if 
necessary, update, their respective CDPs. The CDPs shall be formulated and 
approved in accordance with the provisions of the Local Government Code.
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.
SEC. 7. Performance-Based Evaluation. -  A performance-based evaluation 
shall be conducted by the Performance Evaluation Committee (PEC) chaired 
by the Undersecretary for Local Government of the Department of Interior and 
Local Government (DILG). Before the end of the fourth quarter of each year, 
the PEC shall conduct an annual performance review of the LGUs’ 
implementation of their development PAPs based on the indicators identified 
in their CDPs. 
The results of the review shall be published and made 
available to the public, thru online or otherwise, on or before April 30 of each 
year.
Unsatisfactory performance of an LGU shall result in the reduction of its LDF 
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 the distribution of the LDF to the LGU shall be 
terminated in case of two (2) consecutive unsatisfactory performance scores; 
Provided finally, That LGUs, whose LDF has been terminated, may reapply 
for funding of their CDPs one (1) year following its termination.


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SEC. 8. Web-based Monitoring System. -  The PEC 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 LCDs or as frequently as may be necessary. The local chief executive 
of each LGU shall be responsible of ensuring the reportorial requirements are 
complied with.
In case of non-reporting or failure to comply with the reportorial requirements, 
the PEC 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 funding/cost. location, contractor, progress status, 
number of beneficiaries, date of completion and responsible government 
official, of the PAPs shall be disclosed.
An amount, which shall not be less than Twenty Five Million Pesos 
(P25,000,000.00) is hereby appropriated to fund the establishment of a web- 
based monitoring system.
SEC. 9. Performance Evaluation Committee. -  There is hereby created a 
PEC in charge of the monitoring and evaluation of the implementation of 
development PAPs funded by the LDF based on the indicators provided under 
the CDPs. The PEC shall be composed of the following:
a) The Undersecretary for Local Government of the DILG, as Chairman;
b) The Assistant Director-General for Planning of the National Economic 
and Development Authority (NEDA);
c) The Assistant Secretary for Policy and Planning of the DBM;
d) The Executive Director of the Bureau of Local Government Finance 
(BLGF) of the Department of Finance (DOF);
e) A representative from each of the various leagues of the different LGUs 
concerned;
f) A representative from the National Commission on Indigenous Cultural 
Communities/Indigenous Peoples (NCIP), if applicable; and
g) Four (4) representatives from accredited civil 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 PEC.
The various Regional Project Monitoring Committees (RPMC) shall assist the 
PEC in its task and shall act as the secretariat of the PEC with respect to their 
region.


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SEC. 10. Capacity Building. -  The Local Government Academy (LGA), in 
consultation 
with 
institutions 
of 
higher 
learning 
with 
distinguished 
competencies in public governance programs, is hereby 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 GDPs. For this purpose, an amount, 
which shall not be more than Fifty Million Pesos (P50,000,000.00) shall be 
appropriated for capacity building of all LGUs.
No LDF shall be released without a certification from the LGA that the LGU is 
capacitated to plan and implement its GDP.
SEC. 11. Procurement. -  Procurement for the purpose of implementing the 
GDPs must be consistent with the provisions of Republic Act No. 9184, 
otherwise known as the “Government Procurement Reform Act”.
SEC. 12. Penal Provision. -  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 Act shall suffer the penalty of 
imprisonment ranging from one (1) year and one (1) day to six (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.
The Local Chief Executive shall be administratively liable, without prejudice to 
any civil or criminal liabilities he may have incurred under existing laws, in 
case of failure to report the status of their development PAPs as required 
under Section 8 of this Act.
Any government official or employee who shall prevent the reporting or 
disclosure of any information or data pertaining to a funded development PAP 
as mandated by Section 8 of this Act shall be held administratively liable, 
without prejudice to any civil or criminal liability he/she may have incurred 
under existing laws.
SEC. 13. Oversight Committee. -  There is hereby created a Joint 
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 jointly chaired by the Chairperson of the 
Committees on Local Government of the Senate and the House of 
Representatives.
SEC. 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 the 
purposes of this Act, the term "sunset review" shall mean a systematic 
evaluation by Congress of the accomplishments and impact of this Act, as


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well as the performance of LGUs, for purposes of determining remedial
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legislation.
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SEC. 15. Coordination with Other Agencies. -  In adopting technical skills 
training program, each LGU shall closely coordinate with the Technical 
Education and Skills Development Authority (TESDA), and with other relevant 
government agencies in order to efficiently and effectively carry out their 
respective CDPs.
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SEC. 16. Implementing 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 and other relevant stakeholders, shall issue the necessary 
implementing rules and regulations of this Act within sixty (60) days from the 
effectivity of this Act.
SEC. 17. Suppletory Application of Existing Laws. -  The provisions of the 
Local Government Code of 1991 and other laws consistent with this Act shall 
have suppletory effect.
SEC. 18. 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.
SEC. 19. 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.
SEC. 20. 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.
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Approved,