Republic of the Philippines

Department of the Interior and Local Government

CORDILLERA ADMINISTRATIVE REGION
Barangay Center, Baguio City

DILG-CAR OPINION NO. 02

Series of 1999

20% DEVELOPMENT FUND

-QUERIES1. What is the extent of the participation of the legislative body
(Sangguniang Panlalawigan) regarding the allocation of the 20%
Development Fund as manifested in the Annual Investment Plan (AlP),
considering the fact that the said AIP is already approved and adopted
by the Provincial Development Council?
2. Can we immediately implement programs and projects embodied in the
AIP upon approval and adoption by the PDC pending the review of the
annual budget by DBM?
3. Are allocations of the 20% Development Fund also subject to the
Annual Closure of Accounts and Reversion of Funds at the end of each
calendar year? Or, are they considered continuing; and if so, for how
long?

-OPINIONOn the first query, may we state that theoretically, the Sanggunian does not have any
direct participation in the preparation and approval of the Annual Investment Plan. The
AIP covers the priority investment plans for the applicable year. It is just an extract
from the Comprehensive Development Plan. As clearly enunciated under DILG
Memorandum Circular No. 92-41, issued on 06 July 1992, "these one-year investment
plans shall be based on the existing development plans. This existing development
plan is the CDP which had been previously approved by the Sanggunian as mandated
by Sec. 106 of the Local Government Code of 1991, quote:
"See. 106. Local Development Councils. - Each local government unit shall
have a comprehensive multi-sectoral development plan to be initiated by its
development council and approved by its sanggunian. x x x." (underlining
supplied)
It will be repugnant to the basic rules of logic and practicality if the Sanggunian will
again approve the AIP which is just an extract from the CDP it had previously approved.
This will foster too much red tape, to the point that nothing would be accomplished
within the periods mandated by law. May we point out, at this juncture, that the AIP is
just an "input document" in the preparation of the annual budget by the Chief
Executive. The PDC is mandated to submit to the Local Finance Committee a copy of
the AIP for the preparation of the Executive Budget. DBM-COA Circular No.93-2, issued

on 08 June 1993, otherwise known as the "Budget Manual for Local Government Units",
is explicit on this matter, quote:
Chapter II - Budget Preparation
"5.2 Submission of Local Development Plan. Before the start of budget
preparation activities, the local development council shall submit to the LFC a
copy of the approved/updated local development plan and annual investment
program." (underlining supplied)
Thus, for the sake of expediency, the more logical assumption would be that, as far as
the AIP is concerned, it is enough that the PDC shall update it, taking into consideration
the degree of priority for each project in each applicable year. After all, as pointed out
earlier, the AIP is just an extract from the approved comprehensive local development
plan.
It may be added that it is the local budget that shall operationalize the AIP. This is
expressly stated under Sec. 305 (i) of the Code, quote: "local budgets shall
operationalize approved local development plans." However, the budget is not selfexecuting. It must be submitted to the Sanggunian for authorization through the
enactment of the corresponding appropriations ordinance, in accordance with the
fundamental principle that "no money shall be paid out of the local treasury except in
pursuance of an appropriations ordinance or law, " (Sec. 305 (a), LGC).
In the enactment of the appropriations ordinance, "the Sanggunian is expected to,
among others, examine the budget with regard to its conformity with the local
development plan and the local government policy, " (Item 3.2, Chapter I, DBM-COA
Circular 93-2). From the way the provision is worded, the more logical construction is
that, once the budget conforms to the AIP, or the local development plan in general,
then all the Sanggunian has to do is approve the budget as far as development plans
are concerned. The reason why a minimum of 20% of the IRA is set aside as
development fund is to ensure that development projects shall have available funding.
In reality, however, the Sanggunian is not a "rubber-stamp" of the Chief Executive. It
may happen that during the deliberation on the enactment of the appropriations
ordinance, development project as contained in the AIP and operationalized in the
Budget may be modified and/or deleted. In this way, we could say that there is an
"indirect" participation of the Sanggunian in the AIP. There is then a possibility that the
programs and projects embodied in the AIP as approved by the PDC are totally different
from those embodied in the approved appropriations ordinance. This problem,
however, shall be threshed out in the Budget Review; a discussion of which shall follow
in the in the ensuing paragraphs.
On the second query, we pointed out earlier that the programs and projects under the
AIP are incorporated in the annual Budget; the latter is subject to review by DBM. The
review function of DBM concerning appropriation ordinances is directly provided under
the Code. Sec. 326 of the Local Government Code is explicit on this matter, quote:
"See. 326. Review of Appropriation Ordinances ofProvinces, HighlyUrbanized Cities, x x x. - The Department of Budget and Management shall
review ordinances authorizing the annual or supplemental appropriations of
provinces, highly-urbanized cities, x x x, in accordance with the immediately
succeeding Section. " (underlining supplied)

The review function of DBM is mandatory. It would be absurd to construe the provision
to simply grant DBM the power to review the ordinance to check if the same complies
with existing laws and guidelines and do nothing afterwards. The logical conclusion is
that once DBM finds the annual budget, as enacted under an appropriation ordinance,
to be in accordance with existing laws, it will approve the same for execution;
otherwise, it shall remand the same to the Sanggunian concerned for revision or
amendment. Budget execution follows then only after such budget passes the review
phase.
As succinctly pointed out by authors Jocelyn C. Cuaresma, et. al., "once the budget

passes review, it goes into the fourth phase of the budget process called the budget
execution. This phase involves the release and actual disbursement of funds for the
identified functions, projects, or activities, (Local Fiscal Administration in the Phil.,
J.C. Cuaresma /S.A. Ilago, 1996, p. 121). "The review also verifies the consistency of
funded programs and projects with the LDP, the LDIP, and the AIP. When the budget is
found to be materially inconsistent with the approved LDP, LDIP, and AIP (as approved
by the Local Development Councils), the reviewing office/r may require revision of the
budget, " (Handbook of Local Fiscal Administration in the Phil., Alicia B. Celestino, et.
al., 1998, p. 292).
It appears therefore that projects and programs under the AIP, as approved by the
PDC, shall not be immediately implemented pending a review of the annual budget by
DBM. As mentioned earlier, there is a possibility that the projects and programs
embodied in the AIP may be inconsistent with those contained in the annual budget. It
is here in the review phase where this problem is threshed out. In such case, DBM will
return the ordinance to the Sanggunian concerned for revision or amendment,
instructing the latter to incorporate the programs and projects embodied in the LDP,
LDIP, and AIP as approved by the Local Development Councils.
As an added point, may we call your attention to the pertinent provisions of COA-DBM
Joint Circular No.93-2, otherwise known as the "Budget Operations Manual for LGUs",
issued on 08 June 1993, particularly Item 6.1, Chapter III and Item 1.2, Chapter IV,
quoted hereunder:
"Chapter III - Budget Authorization
6.1 A duly enacted appropriation ordinance authorizing the annual budget takes
effect at the beginning of the ensuing year."
"Chapter IV - Budget Review
1.2 This means that although the budget may have been authorized by the
sanggunian through the enactment of an appropriation ordinance, it still
needs to be reviewed and declared operative by the appropriate reviewing
office/r for the budget to become wholly executory."
Reconciling the above seemingly contradictory provisions, the meaning is that as far as
mandatory obligations and expenditures are concerned, like payment of personnel
services, the same shall be payable at the beginning of the applicable year although a
review of the annual budget is still pending. But, as far as other projects and programs
are concerned, they shall be executed only after the review of the annual budget.
In addition, your
whereby DBM is
other supporting
the part of DBM

attention is called to the provision of the same DBM-COA Joint Circular

given a period of ninety (90) days upon receipt of the ordinance and
documents to review the same, (Item 2.4.1.a, Chapter IV). Failure on
to review the ordinance within the allotted 90-day period shall cause

the ordinance to be in full force and effect as if it was duly approved, (Item 2.5.1,
Chapter IV). Thus, projects and programs under the AIP are executed only after the
annual budget passes review or when the budget is not acted upon within the
reglementary period.
On the third query, may we call your attention to the pertinent provision of DILG
Memorandum Circular No.99-66 regarding the matter, quote:
"II. General Policies and Guidelines
xxx
5. Any reverted or unexpended balance of the 20% Development Fund during
the year shall be re-appropriated to finance only those development programs,
projects or activities identified to be funded under the 20% Development Fund
for the ensuing year." (underlining supplied)
From the way the above provision is worded, it appears that any unexpended balance
of the 20% DF for a given year is available for appropriation in the ensuing year. In
fine, such unexpended balance shall be treated as a continuing appropriation. In as
much as the provision provides that the same is available for the ensuing year, it is
imperative that such unexpended balance shall only be utilized until December 31st of
such ensuing year. However, the same shall be re-appropriated through another
appropriation ordinance and shall only be used for programs, projects or activities
identified to be funded under the 20% DF of such ensuing year. In addition, the usual
accounting entries for closure and re-opening of accounts classified as continuing
appropriations shall be complied with.
______________
Opinion rendered on 12 July 1999 to Mr. RAMOS D. BONGUI, Provincial Planning
and Development Coordinator, Provincial Planning and Development Office, Kabugao,
Apayao.
______________
NOTE : The opinions above rendered were CONCURRED in toto by the Bureau of Local
Government Development, this Department, per Memorandum dated 04 August 1999
signed by Director Teresita M. Mistal.

Prepared By:

Reviewed By:

EUGENE M. BALITANG
Regional Legal Counsel

PATRICK D. ONUS
Assistant Regional Director

Approved:

EVERDINA ECHALAR-DOCTOR
Regional Director
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