NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
I'lgjI Senate
,v4iivr (©ffitp of tljf
72 il 28 P5 1)1
RECEIVED BY:
SENATE
S.B. No. 923
Introduced by SENATOR JOEL VILLANUEVA
AN ACT ENSURING THE EQUITABLE DISTRIBUTION OF FUNDS 
BETWEEN THE NATIONAL GOVERNMENT AND 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 2018, the Supreme Court in 
Mandanas v. Ochoa (G.R. No. 199802) clarified that the just share of the LGUs 
includes all national taxes and not only national internal revenue taxes. This resulted 
in an increase in the amount of IRA, now known as the National Tax Allotment, that 
each LGU receives from the National Government. In fact, the World Bank estimates 
that the share of LGUs in the 2022 budget increased by 55%.1
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 government units.
1 World Bank, PHILIPPINES: Mandanas Ruling Provides Opportunities for Improving Service Delivery Through Enhanced 
Decentralization. June 10. 2021, accessible at httDs://ww\A/.\A/orldbank.ora/en/news/press-release/2021/06/10/philippine_s^ 
mandanas-rurma-provides-ODDortunities-for-improvina-service-deliverv-through-enhanced-decentralization {last accessed July 
22, 2022).


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 to LGUs 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 consistent with their Comprehensive Development Plans. The 
bill also mandates that at least 10% of the LDF must 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 facilitate a more equitable distribution of resources 
across the country. This provision sets the parameters of distribution of the LDF, a 
fund similar to the Growth Equity Fund under Section 8 of Executive Order No. 138, 
series of 2021, which aims to “address issues on marginalization, unequal 
development, high poverty incidence and disparities in the net fiscal capacities of 
LGUs.”
In addition, this bill also provides for various safeguards (e.g., compliance with 
local development plan, local capacity-building, multi-sector 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 JOEL VILLANUEVA


NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
)
SENATE
S.B. No. 923
Senate
o( li)c iSrrretarjJ
•22 JH28 P5«l
RECEIVED BV:
Introduced by SENATOR JOEL VILLANUEVA
AN ACT ENSURING THE EQUITABLE DISTRIBUTION OF FUNDS 
BETWEEN THE NATIONAL GOVERNMENT AND LOCAL 
GOVERNMENT UNITS, 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 “Local Budgeting 
Reform Act."
SEC. 2. Declaration of Policy. - The State and all its 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. For this purpose, the State 
recognizes that meaningful local autonomy can only be realized through the 
implementation of locally crafted development plans that accurately acknowledge and 
address perceived local needs. It also recognizes that inclusive and sustainable 
growth can only be truly achieved by empowering the local government units (LGUs) 
through the provision of adequate resources and technical capacities that will promote 
meaningful development.
SEC. 3. Allotment for 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 province, city, 
municipality, and barangay, herein referred to as the “Local Development Fund” (LDF), 
to wit:
a)
b)
Provinces — Fifty Million Pesos to One Hundred Million Pesos 
(Php50,000,000.00 to Php100,000,000.00) per province per year;
Cities - Ten Million Pesos to Twenty Million Pesos (Php10,000,000.00 to 
Php20,000,000.00) per city per year;


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c) Municipalities - Five Million Pesos to Ten Million Pesos (Php5,000,000.00 
to Php10,000,000.00) per municipality per year; and
d) Barangays - One Million Pesos to Three Million Pesos (Php1,000,000.00 to 
Php3,000,000.00) 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 3rd class LGU;
d) 80% of the prescribed amount for each 4th class LGU;
e) 90% of the prescribed amount for each 5th 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.
These funds shall be automatically and directly released to every LGU at the 
start of every fiscal year or on a 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 LDF.
SEC. 4. Purpose of Locel Development Fund. — The LDF shall be used solely 
by the LGUs to finance their respective development projects, activities and programs 
(PAPs) identified in their approved 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 LDF 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 of Act No. 3815, otherwise known as the 
“Revised Penal Code.”
SEC. 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 the like;
b) 
Salaries, wages, emoluments, per diems, or overtime pay;
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 and Multi-Sectoral Development Plan. -
Consistent with Republic Act No. 7160, otherwise known as the “Local Government 
Code of 1991,” every LGU shall formulate a three (3)-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, without prejudice to the 
LGUs’ use of their locally sourced revenues to attain the objectives of their respective 
CDPs.
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,


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whose LDF has been terminated, may reapply for funding of their CDPs one (1) year 
following its termination.
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 
LGUs or as frequently as may be necessary. The local chief executive of each LGU 
shall be responsible for monitoring the compliance of the LGU with all reportorial 
requirements.
In case of non-reporting or failure to adequately 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 
(Php25,000,000.00) 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.


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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.
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 CDPs. For 
this purpose, an amount, which shall not be more than Fifty Million Pesos 
(Php50,000,000.00) 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 CDP.
SEC. 11. Procurement - Procurement for the purpose of implementing the 
CDPs must be consistent with the provisions of Republic Act No. 9184, otherwise 
known as the “Government Procurement Reform Act,” as amended.
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, except 
as provided under this Act.
Unless otherwise provided in this Act, 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 (Php500,000.00), 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 overseethe 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.


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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 well as the performance of LGUs, 
for purposes of determining remedial legislation.
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.
SEC. 16. implementing Rules and Regulations. - Within sixty (60) days from 
the effectivity 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 rules and regulations for the 
effective implementation 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. - AW 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 
publication in the Official Gazette or in at least two (2) newspapers of general 
circulation.
Approved,