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HOUSE OF REPRESENTATIVES,
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. ©” S39

Introduced by REP. ROMAN T. ROMULO
Lone District, Pasig City

AN ACT
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

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 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.

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.

R_Ro

ROMAN T. ROMULO


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BRR S

HOUSE OF REPRESENTATIVES,
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO on

Introduced by REP. ROMAN T. ROMULO
Lone District, Pasig City

AN ACT
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,

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 2016."

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,

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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) 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;

(©) 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 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 Hundred Million Pesos to One Billion Pesos
(P500,000,000.00 to Pi ,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.

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 1* class LGU;
b) 60% of the prescribed amount for each 2™ class LGU;
c) 70% of the prescribed amount for each 3 class LGU;
d) 80% of the prescribed amount for each 4" class LGU;
e) 90% of the prescribed amount for each 5" class LGU; and
f) 100% of the prescribed amount for each 6" class LGU;
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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.

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 of Act No.
3815, otherwise 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 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,


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(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. Comprehensive Local 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 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

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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 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 of non-reporting or failure to comply 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 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.

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:


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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 Office of the Cabinet Secretary,

3. The Undersecretary 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) of the 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,

8. 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 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.


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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
(LGA), 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/or state university/ies may be considered for academic
credits.

The LGA 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
CPs.

For this purpose, the amount of One Billion Pesos (P1,000,000,000.00)
is hereby appropriated for capacity building of all LGUs.

The LGA 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 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
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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 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 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. 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


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leagues of the different LGUs, shall issuethe necessary Implementing Rules
and Regulations.

SECTION. 16. Suppletory Application af Existing Laws. - The
provisions of Republic Act No. 7160, otherwise known as the "Local

Government Code of 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
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,