Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

HOUSE BILLNO,_" 4028

Introduced by Honorable Roger G. Mercado

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

“Tt 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
structure 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 2014 General Appropriations Act (GAA) enacted through
Republic Act 10633, LGU shares, through the Allocation to Local Government
Units, Internal Revenue Allotment and Bottom-Up Budgeting, amount to only
P381.1 billion. This translates to a mere 16.8% of the P2.26 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.
In 2014 alone, unused appropriations of all 34 national departments and agencies
amount to a staggering P310,094,397,000. This is 26.15% of the total
P1,186,029,690,000 regular budget for FY 2014.

Thus, it is the intention of this proposal to institutionalize rational and
equitable budget distribution for LGU development for them to be active
participants in nation building,

Under the proposal, the amount allocated to the LGUs will be referred to as
the “Local Development Fund (LDF)”, which will be divided among the different
political subdivisions solely for developmental projects, activities and programs
(PAPs) based on their 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 of the LDFs, Capacity building will
enhance local governance, improve delivery of public service, and strengthen
accountability among local governments. These are important in effectively
carrying out devolved functions and ultimately, attaining local autonomy.

Hence, adequate funds 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 with 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,

ROGER G. ‘RCADO


Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

4023

HOUSE BILL NO.

Introduced by Honorable Roger G. Mercado

AN ACT
TING 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

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

1 SECTION. 1. Short Title. - This Act shall be known as the "THE
2 BUDGET REFORM FOR VILLAGE EMPOWERMENT ACT OF 2016."

3 SECTION. 2. Declaration of Policy. —

4 (a) It is a declared policy of the State that territorial and political
5 subdivisions shall enjoy genuine and meaningful local autonomy to
6 enable them to attain their fullest development as self-reliant
7 communities and make them more effective partners in the
8 attainment of national goals;

9 (b) It is also the policy of the State that meaningful local autonomy can
10 only be realized through the implementation of locally crafted
com development plans that accurately acknowledge and address

12 perceived local needs;


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(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) Ibis 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;
(c) ‘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 for Development. - To achieve the policies
declared in this Act, the National Government shall guarantee an annual
fundsufficient 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 Hundred Million Pesos to One Billion Pesos
(P500,000,000.00 to P1,000,000,000.00) per province per year;

(b) Cities — One Hundred Million Pesos to Two Hundred Million Pesos
(P100,000,000.00to P200,000,000.00) per city per year;

(c) Municipalities -Fifty Million Pesos to One Hundred Million Pesos
(P50,000,000.00 to P100,000,000.00) 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.

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

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). 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 of Act No. 3815, otherwise known as the "Revised Penal Code"


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SECTION. 5. Expenditures Not Covered. - No amount shall be paid out
of the LDFto 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;

(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 to support NGAs’ identified PAPs.

SECTION. 6. ComprehensiveLocal Development Plan, — Consistent with
Republic Act 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, and if
necessary, update 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 shalll 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

SECTION. 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 the year,

said committee shall conduct an annual performance review of the LGUs!

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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
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, 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. —  \n the spirit of
transparency and accountability, 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 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
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.

The amount of One Hundred Million Pesos (P100,000,000.00) is hereby
appropriated to fund the establishment of a web-based monitoring system.

SECTION. 9. Performance Evaluation Committee. - There is hereby
created a Performance 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. The Assistant Director-General for Planning of the National Economic and

Development Authority (NEDA);

3. The Assistant Secretary for Policy and Planning of the DBM;


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4. The Executive Director of the Bureau of Local Government Finance
(BLGE) of the Department of Finance (DOF);

5. A representative from each of the various leagues of the different LGUs
concerned:

6. A representative from the National Commission on Indigenous Cultural
Communities/Indigenous Peoples (NCIP), if applicable; and,

7. Four 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 of monitoring and evaluation and shall act as the secretariat of
the PEC with respect to their region.

SECTION. 10. Capacity Building. — The Local Government Academy
(LGA), in consortium 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, the amount of One Billion
Pesos (P1,000,000,000.00) is hereby appropriated for capacity building of all
LGUs.

No Local Development Fund shall be released without a certification from
the LGA 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 —

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 violatingthe
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


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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 incurred 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 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 may have incurred 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 @ 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. 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, shall issuethe necessary Implementing Rules and Regulations

SE
of Republic Act No. 7160, otherwise known as the "Local Government Code of

TION. 16. Suppletory Application of Existing Laws. - The provisions

1991" and other laws consistent with this Act shall have suppletory 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


Anak wNH

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,