01 Phi Tacr

Technical Assistance Consultants Report
Project Number: 39516

TA 7019-PHI
May 2010
Philippines: Local Government Financing and Budget

Reform
(Financed by the Japan Special Fund)
Prepared by: POYRY IDP Consult, Inc.

Manila, Philippines
For: Department of Interior and Local Government
This consultants report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. (For project preparatory technical
assistance: All the views expressed herein may not be incorporated into the proposed projects design.
ADB TA 7019-PHI
LOCAL GOVERNMENT
FINANCING AND BUDGET
REFORM (LGFBR) PROJECT
FINAL REPORT
Volume One: Main Report and Appendices
Pyry IDP Consult, Inc.

19 May 2008 14 May 2010
Abbreviations and Acronyms

ADB
AIP
BGPMS
BLGD
BLGS
BLGF
CAR
CBMS
CCD
CDP
CIDA
CLUP
CPI
DA
DBM
DENR
DILG
DOF
DOH
DSWD
EA
EC
ELA
ENR
EO
ESWM
HLURB
HOR
ICC
IRA
JICA
JMC
LCP
LDC
LDIP
LGC
LGFBR
LGFPMS
LGOOs
LGPMS
LGUs
LMP
LnB
LPDO
LPP
LOGODEF
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
_
Asian Development Bank

Annual Investment Program
Barangay Government Performance Monitoring System
Bureau of Local Government Development
Bureau of Local Government Supervision
Bureau of Local Government and Finance
Cordillera Autonomous Region
Community-Based Monitoring System
Coordinating Committee on Decentralization
Comprehensive Development Plan
Canadian International Development Agency
Comprehensive Land Use Plan
Consumer Price Index
Department of Agriculture
Department of Budget and Management
Department of Natural Resources
Department of Interior and Local Government
Department of Finance
Department of Health
Department of Social Welfare
Executing Agency
Executive Committee
Executive Legislative Agenda
Environment and Natural Resources
Executive Order
Ecological Solid Waste Management
Housing and Land Use Regulatory Board
House of Representatives
Investment Coordination Committee
Internal Revenue Allotment
Japan International Cooperation Agency
Joint Memorandum Circular
League of Cities of the Philippines
Local Development Council
Local Development Investment Plan
Local Government Code
Local Government Financing and Budget Reform
Local Government Financial Performance Monitoring System
Local Government Operations Officers
Local Government Performance Management System
Local Government Units
League of Municipalities of the Philippines
Liga ng mga Barangay
Local Planning and Development Office
League of Provinces of the Philippines
Local Government Development Foundation
MLGOO
MOU
NEDA
NG
NGAs
NSO
NVA
PBUSS
PDF
PBGS
PHCO
PVS
RLPS
RPS
SEF
SLDR
SLGPR
SLGR
SMV
TA
TOR
UBOM
ULAP
UP-NCPAG
_
_
_
_
_
_
_
_
_
_
_
_
_
VRA
WB
Municipal Local Government Operations Officers

Memorandum of Understanding
National Economic and Development Authority
National Government
National Government Agencies
National Statistics Office
National Valuation Authority
Philippine Basic Urban Services Sector
Philippine Development Forum
Performance Based Grant System
Philippine Country Office
Property Valuation Staff
Rationalized Local Planning System
Rationalized Planning Systems
Special Education Fund
State of Local Development Report
State of Local Governance Performance Report
State of Local Governance Report
Schedule of Market Values
Technical Assistance
Terms of Reference
Updated Budget Operations Manual
Union of Local Authorities of the Philippines
University of the Philippines National College for Public
Administration and Government
Valuation Reform Act
World Bank
TABLE OF CONTENTS
Page No.
Executive Summary
I.
Introduction and Overview
II.
Issues and Objectives of the Project

A. Component A
B. Component B
C. Component C
2
2
7
8
Volume 1 Main Report
III. Project Deliverables: Rationale and Performance

A. Component A
B. Component B
C. Component C
9
9
15
22
III. Project Deliverables: Rationale and Performance

A. Component A
B. Component B
C. Component C
9
9
15
22
IV. Outcome and Assessment of Project Deliverables

A. Component A
B. Component B
C. Component C
25
25
28
29
V.
30
30
30
31
Recommendations for Next Step

A. Component A
B. Component B
C. Component C
VI. Summary of Resources Used:

Table 1
Table 2
Table 3
Table 4
Table 5
Table 6
Table 7
Table 8
Table 9
Table 10
Table 11
Table 12
Component A - Summary of Project Deliverables (As of May 15, 2010):

Actual Vs. Expected
Component B - Summary of Project Deliverables: Actual Vs. Expected
Summary of Training Activities under Component B
Component C - Summary of Project Deliverables: Actual Vs. Expected
Component A - Deliverables, Expected Outcome, Actual Outcome and
Assessment
Component B - Deliverables, Expected Outcome, Actual Outcome and
Assessment
Component C - Deliverables, Expected Outcome, Actual Outcome and
Assessment
Component A Next Steps: Activities and Expected Outputs (Up to
Project End)
Component B Next Steps: Activities and Expected Outputs
Component C Next Steps: Activities and Expected Outputs
Summary of Level of Effort Usage (As of May 14, 2010)
Summary of Equipment and Workshop Resources Used (As of
November 2009)
32
9
16
19
23
25
28
29
30
31
32
32
33
Appendix A:
Component A Outputs
Appendix B:
Component B Outputs
Appendix C:
Component C Outputs
Volume 2:
Finalized CDP Training Modules
Volume 3:
Finalized Enhanced Guide to Comprehensive

Development Plan (CDP) Preparation
Volume 4:
Guide to Ecological Profiling
Volume 5:
Rationalizing the Local Planning System
Volume 6:
Study on the Local Planning Database Management System
Volume 7:
Local Governance Performance Management System (LGPMS)

Users Manual and Sample Output
Volume 8:
Legislative Agenda for the Comprehensive Study on the Status of

Decentralization.
ADB TA 7019: Local Government Financing and Budget Reform Project

Final Report
May 2010
Executive Summary
1.
This final report for ADB TA 7019-PHI: Local Government Financing and Budget
Reform Project summarizes the projects accomplishments from May 19, 2008-May 14, 2010
which concludes all activities for Component A, B and C, originally planned and additional
requested, and outlines the recommendations for the next steps for the concluded activities.
The contents of this final report were described in the projects consolidated fourth and fifth
quarter report submitted last October 2009 and agreed upon in the second variation
approval which was approved in November 2009.
2.
This main report is divided into six sections. The first section is the introduction and
provides a brief overview of the project as presented in the Inception Report. The second
section discusses the issues and the objectives of the project also as reported in the
Inception Report. The third section discusses the project deliverables, the rationale or
relation to the objectives of the project and their performance in the project. The fourth
section discusses the project outcomes what were the assumed to be, what actually
happened, and their implications. The fifth section provides the conclusions and the next
steps. The final section presents a report of the use of consultant and workshop/consultation
resources up to the writing of this report.
3.
Under the Inception Report, the focus of Component A is to 1) facilitate the creation
or institutionalization of the Coordinating Committee on Decentralization; 2) provide technical
support for the CCD Policy Agenda; and 3) facilitate the creation of the CCD technical
secretariat to replace the project support team. It was determined during project design and
reconfirmed during the inception period that there was a need for a coordinating body
composed of the oversight central government agencies the Department of the Interior and
Local Government (DILG), the Department of Finance (DOF), the Department of Budget and
Management (DBM) and the National Economic and Development Authority (NEDA)and
the local government leagues the League of Provinces of the Philippines (LPP), the
League of Cities of the Philippines (LCP), the League of Municipalities of the Philippines
(LMP), the Liga ng mga Barangay (LnB), and Union of Local Authorities of the Philippines
(ULAP) to address interrelated issues in fiscal decentralization, local financial management,
local expenditure management and planning, local revenue generation, and local
governance. Although under the Local Government Code of 1991, such a coordinating body
was created, it met very rarely, with last recorded meeting held in 2005, and was difficult to
organize due to the size of its membership which spanned all levels of government including
the legislature. It was determined that a smaller body composed of the abovementioned
agencies could address a majority of the local government issues and could elevate the
more difficult ones to the LGC created body or Oversight Committee on Devolution (OCD).
In order to further support this new body, technical support and assistance for the creation of
a technical secretariat was needed.
4.
The focus of Component B is to provide 1) a deeper appreciation by the DILG Local
Government Operations Officers (LGOOs) and other key actors in the extension of planning
assistance to LGUs, e.g., Provincial Planning and Development Coordinators and HLURB
field personnel at the regional and provincial levels of the concepts and principles of the
rationalized local planning system and the JMC No. 001 series of 2007;Improved
competencies of the DILG LGOOs to exercise their functions as coaches/trainors for LGUs
in the preparation of CDPs, and as collaborators/facilitators in the preparation of Codecompliant CLUPs in their respective LGUs; and improved data management system
(collection, storage, retrieval)
Page | i

Final Report
May 2010
5.
The focus of Component C of TA 7019 is for improving revenue and service delivery
through an improved implementation of the Local Governance Performance Management
System (LGPMS). The LGPMS is one of the major innovations in improving local
governance in the country. The purpose of the system is to evolve a performance-based
management system and strengthen a culture of performance amongst local governments.
6.
The deliverables of Component A were calibrated to meet the three objectives: a) the
creation or institutionalization of the Coordinating Committee on Decentralization, b)
progress on selected LGFBR-related policy reforms, and c) the creation and capacitating of
the CCD technical secretariat. The achievement of the second objectives is related to the
achievement of the first since it was by jointly working at these key reforms that the
members of the CCD moved towards institutionalizing the body. The following table presents
the deliverables in the Inception Report versus the Actual Deliverables:
7.
The deliverables for main task 1 were designed to provide the DILG and CCD
members with technical assistance on both a pre-selected set of policy concerns for the
purpose of addressing these concerns as well as acclimate them to working with each other
as a body paving the way for the formalization of the CCD. As noted in the table above, only
one policy concern (i.e., NG-LGU Co-Management Issues) did not meet the interest of either
the DILG or the CCD. At the beginning of the project, ten (10) policy issues were preidentified but nine (9) were actively taken up with at one policy outputs generated for the
policy issue and twenty-four (24) additional policy outputs generated for policy issues outside
of the original ten. By this writing of this report, the number of policy outputs generated
exceeded the original count by at least 2.4 times. The additional policy outputs were either
quick-policy response memorandum requested by the DILG for urgent policy issues such as
legislative measures to decrease the local Amusement Tax and creating an additional
bureaucracy for land valuation to issues papers on LGU Access to ODA and local credit
financing and the formulation of the governments (i.e., National and Local Government)
position for the Philippine Development Forum Working Group on Decentralization and Local
Government annual workplan.
8.
The deliverables for main task 2 were designed to formalize the Coordinating
Committee on Decentralization, its membership and structure, scope of work, relation to
other agencies, and technical secretariat. After much deliberation, the legal instrument
decided upon was a Memorandum of Understanding which was signed by both the oversight
agency members (i.e., DILG, DOF, DBM, and NEDA) and the LGU Leagues (i.e., LPP, LMP,
LCP, LnB, and ULAP) last November 2009. A welcome development occurred during the
deliberations which resulted in the agreed expansion of the powers of the CCD. In earlier
deliberations, it was agreed that the role of the CCD was to address issues which did not
require the reconstitution of the much larger, multi-sectoral Oversight Committee on
Devolution (OCD). However, upon the request of the DBM, the group has decided to
become the body which would trigger the reconvening of the OCD to address policy issues
that is beyond the authority of the CCD members. An example of such policy issue is the
determination of the release of the IRA shares based on new census data. This policy issue
will be discussed in the next CCD meeting as well as an agreement on how to trigger the
recovening of the CCD possibly through a CCD resolution and a MOU with the Office of the
President.
9.
The deliverables for the third task have been completed by project end with
recommendations for further assistance to the CCD Technical Secretariat included in this
final report. However, part of this assistance is being provided in the upcoming LGFBR
Subprogram 2 TA.
10.
The principal deliverables under Component consist of the following:
Page | ii

Final Report
May 2010
a. Enhanced Guide to Comprehensive Development Plan Preparation This

is designed as a reference document that can assist LGOOs and/or local
planning and development officers in facilitating the formulation of a CDP
and LDIP.
b. Training Modules and Session Guides for the Conduct of Courses on
CDP Preparation The training modules and session guides for both the
Introductory Course and Intensive Course on CDP Preparation are the
same, except that the latter includes hands-on exercises on the
application of tools and techniques for the sectoral profiles and plan
development.
c. Cross-Referencing Guide This is a matrix of suggested tools and
techniques for planning, investment programming and plan monitoring
and evaluation extracted from the various manuals and guidebooks
prepared by NEDA, DBM and DOF in addition to those contained in the
RPS Sourcebook. This will allow users of the Guide to select the
appropriate tool or adopt a technique based on his/her capability and
appreciation of such tool or technique.
d. Reports on Consultation-Dialogues with HLURB, DBM and other National
Government Agencies Engagement with HLURB will seek to establish
and clarify relationships between the CLUP and CDP preparation process
and guidebook; delineate and clearly spell out functional responsibilities
and areas for dovetailing one from the other; and describe points of
interface between the CLUP and CDP.
Expected output from this engagement is a Joint Memorandum Circular between
DILG and HLURB articulating the above.
11.
Discussions with DBM are expected to yield the following results:

a. Funnelling of the five (5) development sectors of the CDP into the three
(3) budgetary sectors.
b. Agreement of the definition of
investment program and other terms used
in local development investment programming.
12.
Meetings with other national government agencies are envisioned to draw out
consensus on how thematic/cross-sectoral or sectoral concerns can be mainstreamed or
integrated not only in the CDP preparation process but more importantly, in the rationalized
local planning system.
13.
Some of the agencies identified for this purpose are the National Council on the Role
of Filipino Women (NCRFW) for Gender and Development; National Disaster Coordinating
Council (NDCC) for Disaster Risk Reduction and Management Plan; National Commission
on Indigenous Peoples (NCIP) for the Ancestral Domain Sustainable Development and
Protection Plan (ADSDPP); Council for the Welfare of Children for the protection of children
and promotion of childrens rights; National Police Commission/National Security Council for
the Peace and Security Plan; etc.
14.
In the course of the project period, Component B conducted eleven (11) training
activities covering all regions except for the Autonomous Region of Muslim Mindanao. The
total number of person trained is 658 which is 54.8% higher than the 425 persons trained
committed under the Inception Report.
Page | iii

Final Report
15.
May 2010
The highlights of the Component C accomplishments are the following:

a. Enhancement/development of an analytical framework for utilizing
LGPMS assessment results in LGU operations including planning and
budgeting, monitoring and evaluation, capacity development, application
in performance-based grant system, policy development.
b. Development of a utilization manual for LGPMS that links LGU
performance data to LGU planning and budgeting.
c. Training of select core DILG personnel on the practical application of
LGPMS.
d. Provision of technical assistance in the development of the LGPMS online database system
16.
As a result of the outputs of Component A, the following outcomes are being
targeted:
a.
Fully-functioning Coordinating Committee on Devolution (CCD) that meets

every month and institutionalized through an executive issuance.
b.
Approved medium-term agenda for CCD.
c.
Fully-functioning CCD Technical Secretariat.
d.
Legislation passed on the Executive and LGU League-endorsed tax

amendments to the Local Government Code of 1991.
e.
Signed Memorandum of Agreements between LGU Leagues and the

Department of Agriculture, Department of Environment and Natural
Resources, Department of Social Welfare and Development, and Department
of Health on further devolution of functions to LGUs.
17.
Three out of the five outcomes have been achieved in full by the end of the project in
May 2009. These are the creation of the CCD, the creation of the CCD Technical
Secretariat, and the development and approval of a medium-term agenda. The first two were
completed through a signed Memorandum of Understanding and the third was finalized as
the LGU Medium-Term Roadmap, 2010-2015 for submission to the next administration.
18.
Two outcomes the passage of legislation for increasing local taxes and
memorandum of agreement for further decentralization in selected national government
agencies such as Agriculture, Environment and Natural Resources, Health, and Social
Welfare and Development were substantially achieved. This means that the policy reform is
in place and will continue to be pursued with a likelihood of being achieved some time after
the project has concluded and in the next administration. With respect to legislation on
improving local taxes, it was the assessment of the team that although consensus and
support was achieved among the CCD members, it could not anticipate nor compensate for
the dynamic between the LGUs and the legislature. It was reported that there exists
underlying friction and competition between some members of Congress, who are also
members of the House Committee on Local Government, and local chief executives. This
resulted in resistance on the part of the legislature to file bills that would improve local
resource generation from taxes. This resistance was strong enough to bar the draft bill in
spite of consultations with the House Committee and letters of endorsements from the DILG
Secretary and the President of the League of Provinces of the Philippines and the League of
Page | iv

Final Report
May 2010
Municipalities of the Philippines. On the other hand, the CCD has not given up on the
proposed measures and will continue to pursue the filing of the bill and the advocacy of the
reform in the next administration when new congressional members will be elected.
However, this project also recommends that any pursuit of this reform in the next
administration study what incentives can motivate and be instituted in order to generate
congressional support for the reforms.
19.
A critical lesson learned from this project is the need to identify incentives on the part
of the legislature in the pursuit of policy reforms. A good example can be found in the
passing of legislation for the lowering of the local amusement tax. In spite of opposition from
the DILG, BLGF and the LGU Leagues, the legislature, both the Senate and the House of
Representatives passed the measure which contravenes the intent of the Local Government
Code of 1991 to improve local revenue generation. The local amusement tax is one of the
taxing powers of the province and city. However, strong support came from both Houses of
Congress because the measure was requested by the local entertainment industry
composed of film producers, actors, and theatre owners. Since local legislators gain
electoral mileage when endorsed by film celebrities, they ensured that the bill passed quickly
into law.
20.
On the matter of further decentralization in selected national government agencies,
executive support in the form of resources for re-engineering the bureaucracy was no longer
available thereby weakening the initiative. Movement in the policy agenda was heavily
contingent on the momentum brought about by the re-engineering agenda of the National
Government. This would provide the incentive for opening up the devolution of functions and
resources to the LGUs by ensuring that redundant central government agency function and
personnel would be compensated with a adequate retirement or separation package.
However, lack of resources, partly due to the financial crises, weakened executive support
for the agenda and the flow of resources. In addition, policy reversals were also being
implemented in some agencies such as the Department of Agriculture which was moving
towards re-nationalizing the devolved functions as well as calls on the part of some
provincial LGUs to re-nationalize their hospitals since they did not have the resources to
support their operation. By the mid-term report of this project, discussions with DILG moved
towards ensuring that the LGUs would have a position paper on further devolution in
selected sectoral agencies that they could present to the next administration for discussion.
The CCD has agreed to support the dialogue and move towards greater decentralization of
the functions with the position papers as the base. As with the local tax legislation, this policy
agenda is in place and has a likelihood of being achieved but sometime after the project has
terminated.
21.
Overall, the desired ultimate outcomes of Component B are the adoption of Codecompliant CDP borne out of enhanced competencies of LGOOs to extend technical
assistance to LGUs and LPDCs in CDP and LDIP formulation within the framework of the
RPS and JMC No. 001 series of 2007; strengthened plan-to-budget linkage through the
investment program; integration of sectoral, cross-sectoral and/or thematic concerns and
plan documents mandated by law or advocated by some national government agencies in
the RPS and the CLUP and CDP.
22.
Modest outcomes are generated based on the Component C accomplishments and
deliverables. The highlights of these outcomes are the re-establishment of the LGPMS as
on-line system and the completion of the LGPMS utilization manual which provides guidance
to users in maximizing the LGPMS information in LGU planning, budgeting and capacity
development planning.
23.
The table below present the recommendations of Component A for succeeding
technical assistance.
Page | v

Final Report
May 2010
Table 1: Component A Next Steps: Activities and Expected Outputs

Activities
Main Task 1: Provide Technical Support for
the interim CCD and the interim-CCD and
CCD Agenda:
i.
ii.
iii.
iv.
Expected Outputs
Finalization of CCD Medium-Term
Roadmap consolidating policy
concerns from other stakeholders for
presentation to next administration.
Finalization of CCD short-term policy
agenda.
Provision of policy advise on CCD
policy matters.
CCD Meetings.
24.
The table below present the recommendations of Component B for succeeding
technical assistance in the areas of local capacity building.
Table 2: Component B Next Steps: Activities and Expected Outputs
Activities
Expected Outputs
1.
Enhanced Guide to CDP Preparation
a)
Style editing to make it more userfriendly.
2.
Harmonization of CLUP and CDP

Guidelines
a)
Formulation of Implementing Rules and

Regulations of JMC No. 001 series of
2009
b)
Development and printing of

Supplemental Guide to CLUP
Preparation leading to the production of
a Code-compliant CLUP prepared within
the framework of the RPS and JMC No.
001 series of 2007.
c)
Development of training modules,

session guides and conduct of training
program on the preparation of Codecompliant CLUP using the Supplemental
Guide on CLUP Preparation.
d)
3.
Mainstreaming of Sectoral/ CrossSectoral/Thematic Concerns in the CDP

and CLUP
4.
Manual on Local Planning Database
Development
of
CLUP
Review
Guidelines, to be used by the Provincial
Land Use Committee (PLUC), that will
ensure harmonization and vertical
integration of the CLUP with the
Provincial Development and Physical
Framework Plan (PDPFP).
e) Development and printing of Manuals for
the preparation of a Provincial
Comprehensive Land Use Plan and a
Provincial Development Plan as
alternative guidebook for formulating two
separate plans as mandated by the Local
Government Code.
Technical
assistance
to
National
Government Agencies and LGUs in
developing
guidebooks/manuals
for
mainstreaming
sectoral/cross-sectoral/
thematic concerns in the CLUP and CDP.
Continuous dialogue with DBM re: adoption
of common definition of terms used in
investment programming
Manual Project End May 2010.
Page | vi

Final Report
May 2010
25.
The fundamental steps for maximizing the LGPMS results in LGU management
functions such as in planning, budgeting and policy development are put in place in this TA
through the LGPMS Utilization Manual. The manual needs to be integrated into the other
LGPMS manuals and disseminated and popularized accordingly with the intended users.
The core DILG staff at the regional and provincial levels should start testing/using the
manual particularly its links to budgeting and capacity development planning. The link of the
LGPMS in development planning can also be put test after next years elections. Training
and coaching modules should be developed for this purpose.
26.
With regards to the systems performance, this needs to be fully tested especially
prior to the conduct of the next round of planning cycle after the 2010 elections. The current
data entry should be technically assessed to prepare the system for a wider and intensive
use in 2010.
27.
The table below outlines some of the key activities that need to be completed to
ensure a wider acceptance and utilization of the LGPMS by LGU users.
Table 3: Component C Next Steps: Activities and Expected Outputs
Activities
Expected Outputs
Integration of the LGPMS Utilization Manual with the LGPMS User Wider utilization of the LGPMS
Manual
manual
Dissemination and training
DILG expertise in facilitating the use
of LGPMS
To further strengthen capacity, improve system performance, and Improvement of the LGPMS System
operations of the system, the following activities are necessary as Design
follows:
Assessment of system usage by users
Development of a data management plan
Formulation of a system security plan
Development of disaster and recovery plan
Finalization of the LGPMS operational plan
Page | vii

Final Report
I.
May 2010
Introduction and Overview
1.
This final report for ADB TA 7019-PHI: Local Government Financing and Budget
Reform Project summarizes the projects accomplishments from May 19, 2008-May 14, 2010
which concludes all activities for Component A, B and C, originally planned and additional
requested, and outlines the recommendations for the next steps for the concluded activities.
The contents of this final report were described in the projects consolidated fourth and fifth
quarter report submitted last October 2009 and agreed upon in the second variation
approval which was approved in November 2009.
2.
This main report is divided into six sections. The first section is the introduction and
provides a brief overview of the project as presented in the Inception Report. The second
section discusses the issues and the objectives of the project also as reported in the
Inception Report. The third section discusses the project deliverables, the rationale or
relation to the objectives of the project and their performance in the project. The fourth
section discusses the project outcomes what were the assumed to be, what actually
happened, and their implications. The fifth section provides the conclusions and the next
steps. The final section presents a report of the use of consultant and workshop/consultation
resources up to the writing of this report. In order to avoid a voluminous report, only project
outputs completed after the consolidated fourth and fifth quarter report will be included in the
appendices. The reader is referred to the first, second, consolidated third quarter and midterm report, and consolidated fourth and fifth quarter reports for previous project outputs.
3.
An appendix providing the final outputs of Component A, B and C are included in this
report. Volume 2 contains the finalized training modules for Component B. Volume 3
contains the finalized Enhanced Guide to Comprehensive Development Plan (CDP)
Preparation. Volume 4 contain the Guide to Ecological Profiling. Volume 5 contains the
report on Rationalizing the Local Planning System. Volume 6 contains finalized Study on the
Local Planning Database Management System. Volume 7 contains the outputs of
Component C which includes the LGPMS Users Manual and sample output. Volume 8
contains the Legislative Agenda for the Comprehensive Study on the Status of
Decentralization under Component A.
4.
Under the Inception Report, the focus of Component A is to 1) facilitate the creation
or institutionalization of the Coordinating Committee on Decentralization; 2) provide technical
support for the CCD Policy Agenda; and 3) facilitate the creation of the CCD technical
secretariat to replace the project support team. It was determined during project design and
reconfirmed during the inception period that there was a need for a coordinating body
composed of the oversight central government agencies the Department of the Interior and
Local Government (DILG), the Department of Finance (DOF), the Department of Budget and
Management (DBM) and the National Economic and Development Authority (NEDA)and
the local government leagues the League of Provinces of the Philippines (LPP), the
League of Cities of the Philippines (LCP), the League of Municipalities of the Philippines
(LMP), the Liga ng mga Barangay (LnB), and Union of Local Authorities of the Philippines
(ULAP) to address interrelated issues in fiscal decentralization, local financial management,
local expenditure management and planning, local revenue generation, and local
governance. Although under the Local Government Code of 1991, such a coordinating body
was created, it met very rarely, with last recorded meeting held in 2005, and was difficult to
organize due to the size of its membership which spanned all levels of government including
the legislature. It was determined that a smaller body composed of the abovementioned
agencies could address a majority of the local government issues and could elevate the
more difficult ones to the LGC created body or Oversight Committee on Devolution (OCD).
In order to further support this new body, technical support and assistance for the creation of
a technical secretariat was needed.
Page | 1

Final Report
May 2010
5.
The focus of Component B is to provide 1) a deeper appreciation by the DILG Local
Government Operations Officers (LGOOs) and other key actors in the extension of planning
assistance to LGUs, e.g., Provincial Planning and Development Coordinators and HLURB
field personnel at the regional and provincial levels of the concepts and principles of the
rationalized local planning system and the JMC No. 001 series of 2007;Improved
competencies of the DILG LGOOs to exercise their functions as coaches/trainors for LGUs
in the preparation of CDPs, and as collaborators/facilitators in the preparation of Codecompliant CLUPs in their respective LGUs; and improved data management system
(collection, storage, retrieval)
6.
The focus of Component C of TA 7019 is for improving revenue and service delivery
through an improved implementation of the Local Governance Performance Management
System (LGPMS). The LGPMS is one of the major innovations in improving local
governance in the country. The purpose of the system is to evolve a performance-based
management system and strengthen a culture of performance amongst local governments.
II.
Issues and Objectives of the Project

A.
Component A
7.
The passage of the Local Government Code of 1991 was a considered a landmark
legislation because it not only transferred the responsibility for the provision of basic services
from the central government to LGUs but also provided the resources to perform these
functions through a system of intergovernmental fiscal transfers (e.g., IRA) and increased
powers to generate own-source revenues, both tax and non-tax (e.g., economic enterprises).
Although the intent was to promote greater local autonomy based on the principle of
Subsidiarity and principles set forth in 1987 Philippine Constitution, the implementation of the
Code was far from smooth and seamless. Even after almost 17 years of the implementation
of the Code, some problems persist not only with regards to the implementation of the
Codes provisions but also with respect to relevance and validity of some provisions given
current and changing fiscal, administrative and political realities.
8.
As part of the process of designing the LGFBR program loan, the ADB team
conducted a comprehensive assessment of the fiscal issues in the LGU sector. The
following summarizes the various key issues:
a.
Unclear expenditure assignments and overlapping service delivery mandates

Although the main responsibility for the delivery of basic services have been
devolved to LGUs, the institutional arrangements are often not clear. National
government agencies still play a key role in the planning and delivery of public
services that have been devolved under the Code. This can partly be blamed
on the Code itself. Section 17 (b) of the Code enumerates the basic services
that the LGUs are expected to deliver. But Section 17 (c) and (f) allows both
the LGUs and the national government agencies to initiate devolved activities.
This complicates what should have been a clear-cut assignment of service
delivery and expenditure responsibilities. This is further complicated by
incentives on the part of both the national government agencies and the
LGUs to maintain the ambiguity. On the part of the NGAs, engaging in direct
service delivery for devolved functions gives them the justification to ask for
increases in their annual budgets. On the part of the LGUs, it allows them to
save on resources that are insufficient to allow to perform their functions
under the Code. The latter is exacerbated by the presence of unfunded
mandates left to them by the National Government such as providing
budgetary support like additional personnel benefits to many national
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Final Report
May 2010
government agencies operating at the same level (e.g., police, fire protection,
etc.).
b.
Lack of completeness, timeliness, and transparency in intergovernmental

transfers LGUs under the Code receive a share of national tax collections
as well as grants. Of these intergovernmental transfers, the most common
and significant is the Internal Revenue Allotments or IRA. Under the Code,
LGUs have a 40% of all national internal revenue collections except for some
selected taxes such as fuel. This 40% is divided among all LGUs first by level
(i.e., provinces, cities, municipalities and barangays) then based on a formula
which takes into account population, land area and equal sharing. For lower
income class LGU, the IRA can constitute as much as 88% to 95% of their
regular income. This level of dependency make it critical that the IRA is
delivered completely and in a timely manner. However, this was not the case
in some years. In 4 of the 6 years between 1998 and 2004, the mandated IRA
was either not appropriated in full or released in full. The gap between
appropriation and obligation ranged from Php 1.5 billion to as much as Php
16.5 billion. This is further complicated by deficiencies in the Codal formula
itself which caused the IRA of many provinces and municipalities to be
insufficient to even cover the cost of devolved functions. With regards to other
intergovernmental transfers, technical and complicated administrative
procedures have delayed if not prevented the release of some LGUs shares
in national wealth. Under the Code, LGUs have a 40% share in taxes
collected for the exploitation of national resources within their jurisdiction.
Complications in accurately estimating the taxes as well as lack of information
on the situs of the tax has created uncertainty in this source of
intergovernmental revenue. The latter is moreso with regards to the LGUs
share in the incremental value added tax (VAT). Finally, there is a lack of
transparency in reporting congressional grants such as the Priority
Development Assistance Fund (PDAF).
c.
Weak governance and systems in public financial management, local

development planning, and expenditure management. - Weak coordination
between the Government and LGU planning has resulted in a break in the
planning chain occurring between the regional and provincial levels. Local
officials report that their investment plans are formulated independent of
regional and national investment plans and vice versa. Less than 70% of
provinces have up-to-date local development plans (LDPs) and annual
investment plans (AIPs), which are oftentimes not linked to each other.
Furthermore, AIPs do not appear to be anchored in clear goals, strategies,
and programs since many LGUs, including cities and municipalities, do not
perform systematic evaluation of projects costs and benefits. In addition, the
integrity of local budgeting is distorted by poor revenue estimates during the
budget formulation process.
d.
Lack of effective performance measurement system An effective

performance measurement system is an indispensable tool not only to
monitor and encourage LGUs to better perform their function in local service
delivery but also to enhance local development planning. A good LGU
performance measurement system not only provides inputs to planning but
should also provide the LGU with information on planning outputs and
outcomes. Of the many performance measurement system for LGUs currently
existing, the most promising has been the Local Government Performance
Measurement System or LGPMS. This system is currently being enhanced
under an existing ADB TA (TA 4778) and linked to the BLGFs local financial
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Final Report
May 2010
measurement system, LFPMS. However, its use for the purpose of local
planning is still undeveloped.
e.
Lack of LGUs to Credit Financing LGUs use credit financing to support

development in infrastructure, capital investment, and part of operating
expenses. More than three-fourths of LGU credit financing is provided by
government financial institutions, mainly the Land Bank of the Philippines,
while the government direct-lending facility, the MDFO accounts for about
7%. The balance is shared by some institutional sources (e.g., GSIS) and
private source through bond floatation. Currently, there is no direct lending to
LGUs by private commercial banks because of an interpretation of Section
299 of the Code giving preference to government banks as depository banks
for the LGUs IRA transfers. Since a creditor-borrower relationship cannot be
clearly established, private banks are reluctant to lend to LGUs. This is further
exacerbated by the lack of accurate financial data on which to evaluate LGUs
as potential clients.
f.
Inadequate own-source revenues and inefficient tax administration Although

the Code has provided the LGUs with greater taxing powers, problems exist
within and without the law which hamper improvements in own-source
revenues and tax administration. Studies have shown that LGUs have
created revenue codes with a huge array of taxes, fees, and charges.
Because of this, taxes are often under-collected or not collected at all. In
addition, many low yielding taxes impose substantial collection and
administrative costs and contribute to a lack of transparency. However,
complicated tax collection processes are not only the result of local
legislation. The Codes provisions for the collection of business taxes imposes
a complicated schedule of rates based on gross sales and type of
establishment that encourages rent seeking behaviour on the part of
collectors. The same is also true with respect to the collection of real property
taxes which is further complicated by the lack of transparency in valuation
procedures. For LGUs intent on improving tax collections, the lack of tax
information and inconsistent financial policy guidelines coming from the DOF
has been a hindrance. Local tax administration has been plagued by i) low
professional qualifications of staff; ii) inadequate automation of core tasks;
and iii) weaknesses in supporting policies at the national level. The low
capacity of LGU staff is manifested by inadequate cash controls, weak
internal audit, absence of effective management, and lack of independent
oversight. Although some LGUs have invested in improvements in information
technology to automate their core tasks, for many this is still an expensive
proposition. Finally, policies at the national level have been lukewarm in their
support for local taxes as a result of their attempt to balance LGU and private
industry interests.
9.
After the Code took effect in 1992, an Oversight Committee on Devolution or OCD
was formed pursuant to Section 533 of the Code. The section provides that
the President
shall convene the Oversight Committee that shall formulate and issue the appropriate rules
and regulations necessary for the efficient and effective implementation of any and all
provisions of this Code thereby ensuring compliance with the principles for local autonomy
as defined under the Constitution. The Committee was a joint executive-legislative body
which had the Executive Secretary as the chairman, three members from the Senate, three
members of the House of Representatives, the Secretary of Interior and Local Government,
Secretary of Finance, the Secretary of Budget and Management, and representatives from
the League of Province, the League of Cities, the League of Municipalities, and the Liga ng
mga Barangay. A technical staff composed of regular employees from both Congress and
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Final Report
May 2010
the Executive was formed to support the activities of the OCD. The OCD eventually faded
away as the transition problems were addressed. However, the OCD was no longer
operational when the transition problems were replaced by implementation issues.
10.
The importance of the OCD or a similar body to address LGU fiscal issues was
highlighted in the LGFBR policy matrix as noted in the previous section. The Philippine
government has committed to forming a Coordination Committee on Decentralization as a
clearinghouse for various LGU fiscal issues that have consequences on delivery of basic
public services. It is intended that through greater coordination among the national
government oversight agencies, a more effective and efficient if not timely resolution of these
issues may be achieved.
11.
Based on consultations with the DILG and the Inception Workshops, the emphasis
has shifted from the LGFBR policy matrix as the centrepiece of this Component to the
Coordination Committee for Decentralization. It was therefore decided to re-title the
Component
Decentralization and Institutionalizing the LGFBR Policy Matrix to
Pursuing
and Institutionalizing Reforms in Decentralization through the Coordination Committee on
Decentralization. It was therefore envisioned that the major policy objectives of the LGFBR
Policy Matrix would be pursued through the CCD.
12.
As a result of the consultations and the two (2) inception workshops, the objectives
have been restated as follows:
a. To facilitate the creation of an evolving body at the Executive Level that will address
issues arising from decentralization and pursue reforms embodied under the scope
of the LGFBR policy matrix. (Task 1: Facilitate the creation of the Coordination
Committee on Decentralization (CCD).
b. To facilitate the actualization of selected mature decentralization reforms and open
dialogue on other less advanced reforms in the abovementioned body. (Task 2:
Provide Technical Support for CCD Agenda)
c. To assist in the creation of a technical support group that will replace the project
team after project termination and provide continuity to the reforms. (Task 3:
Facilitate the creation of a CCD Technical Secretariat)
13. As a result, it was decided to revise the general approach from developing the CCD
early on in the project to the second semester or after 2 quarters. There was a need to
acclimate the pre-CCD members to working on reform issues before establishing a structure
around them. It is only when there is some comfort among the members on how they can
pursue these reforms can a more structured organization be proposed and institutionalized.
In order to operationalize this approach, the pre-CCD members will pursue an initial set of
reform issues which they have mutually agreed to address. The CCD members will
appreciate the need for institutionalizing the CCD or buy into it when they can see value in
the mechanism in the pursuit of the reforms they are most concerned with. In effect, it is
institutionalizing the CCD by institutionalizing the process by which the stakeholders pursue
the reforms.This approach would reduce the resistance to formalizing the body as well as
build a strong collegial relationship among the members.
14. Since the MOU on the JMC 2007-1 has established a collegial body, this
pre-CCD
group can be the basis for addressing LGU and Devolution reform issues through an
consensus agreement on what their agenda should be, what their job is, and who should
they consult to pursue these reforms.
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Final Report
May 2010
15. As part of the organizational agenda, there is also a need to look into how the CCD
will eventually address coordination with other coordinating bodies (e.g., sectoral) as well as
open dialogue on how these coordinating bodies should relate to each other. In addition,
there is also a need to look at other operational issues such as how the CCD will relate to
other bodies at the regional level. Finally, there should also be flexibility in the event that an
opportunity should arise that the CCD could eventually become and oversight body.
16.
Based on this, the methodology was used is as follows:

a.
Work with the existing body created by the Memorandum of Understanding

covered by JMC 2007-1 as an interim-CCD body as the formal CCD is being
designed. This is to allow the timely pursuit of reforms without having to wait
for the operationalization of the formal CCD.
b.
Pursue interim set of reforms (i.e., interim-CCD reforms) with the DILG and
the interim CCD and, through the DILG, concerned partners (e.g., LGU
Leagues) that have reached a state of maturity and cannot wait for the formal
CCD body also as a means of providing an
OJT-experience for the interim
CCD members on the pursuit of these reforms as a body.
c.
Identify a minimum set of policy deliverables (e.g., tax amendments to the

Code) that this Component should deliver so that other policy agenda items
can be substituted for those CCD members strongly feel should be included
in the agenda.
d.
Coordinate with ADB TA 4778 for inputs that are necessary for the CCD
agenda and the creation of the CCD technical secretariat.
e.
Network with other ADB projects (e.g., NEDA Harmonization TA Phase II) to
mitigate potential conflicts as well as other members of the Philippine
Development Forum Working Group on Local Governance and
Decentralization.
17.
To provide the interim-CCD with a selection of policy issues to address, this inception
report outlines below a set of proposed policy issues for the CCDs Medium Term Agenda:
a.
Harmonization of JMC 2007-1 and accompanying MOU. (Non-Legislative)
b.
Harmonization of Land Use Planning and Management LGU-NG comanagement issues. ( Non-Legislative)
c.
Review of improvements in the release of intergovernmental fiscal transfers

IRA, special shares, and VAT. (Non-Legislative)
d.
Advocacy of the tax/fiscal amendments to the Local Government Code of

1991. (Legislative)
e.
Review of non-tax, fiscal amendments to the Local Government Code of 1991

IRA formula, share of LGUs in national wealth, basis of IRA computation,
LGU depository accounts in private banks, share of LGUs in road users fund,
etc. (Non-Legislative and Legislative)
f.
Review of the non-fiscal amendments to the Local Government Code of 1991.

(Legislative)
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Final Report
May 2010
g.
Implementation of further devolution without legislative action in the

Resources, Department of Health, and Department of Social Welfare and
Development as recommended by the LGU Leagues. (Non-Legislative)
h.
Review of further devolution without legislative action in other key national

government agencies such as the Department of Public Works and
Highways, (Non-Legislative)
i.
Federalism by the year 2012. (Legislative)
j.
Other issues that may be recommended by the CCD (e.g., institutionalization

of the OPIF at the LGU level).
B.
Component B
Competency Enhancement on the Rationalized Local Planning System for

Local Government Units
18.
The DILG has commissioned the crafting of the Rationalized Local Planning System
(RPS) in pursuit of its mandate
to establish and formulate plans, policies and programs to
strengthen the technical, fiscal and administrative capabilities of LGUs and to formulate local
planning guidelines in coordination with NEDA and the Leagues1. It launched the RPS as
the framework for preparing both the comprehensive land use plan (CLUP) and
comprehensive development plan (CDP), both of which are mandated under Republic Act
7160 or the Local Government Code of 1991 (hereinafter referred to as
Code for brevity).
It has a two-fold objective: implementation of the full implications of the Code pertaining to
planning, and institutionalization of planning as an important aspect of governance.
19.
Matters involving CLUP, from formulation of guidelines and standards to extension of
technical assistance to local government units (LGUs), fall under the jurisdiction of the
Housing and Land Use Regulatory Board (HLURB); while the CDP is under the institutional
responsibility of DILG.
20.
The RPS offers fresh insights, concepts, approaches, tools and methodologies for
preparing the CDP and its primary implementing instrument, the Local Development
Investment Program (LDIP). It also clarifies, reinforces and elaborates on existing ones that
are currently being used by local government units (LGUs). Further, it introduces Plan
Monitoring as a component of the comprehensive planning cycle and defines the role of
Local Government Operations Officers of DILG in making the planning system work. To
enable the field officers (Local Government Operations Officers or LGOOs) of DILG to
advocate the adoption of the RPS by the LGUs, and to make it possible for them to properly
extend technical assistance to LGUs in adopting the RPS and formulating their CDPs and
LDIPs, they have to be equipped first with the appropriate skills and competencies in using
the tools and techniques offered in the RPS Sourcebook.
21.
Component B of TA 7019 involves undertaking a competency enhancement program
for Local Government Operations Officers (LGOOs) of DILG. It includes the following:
a.
Conduct of two (2) types of training programs:
Refers to the Leagues of Cities, Municipalities and Provinces
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Final Report
on
Comprehensive
May 2010
i.
Introductory Course
Formulation; and
Development
Plan
ii.
Intensive Course which focuses on hands-on exercises on the

application of suggested tools and techniques for Comprehensive
Development Planning
b.
Finalization of the Enhanced Guide to CDP Preparation This will serve as a

facilitators reference document in extending technical assistance to LGUs in
the preparation of their CDPs.
c.
Conduct of a study on the improvement of the local planning database

management system.
C.
Component C:
22.
The use of performance measurement system as a management tool is sparingly
utilized amongst LGUs in the Philippines. Most often, performance measurement is
completed for reporting and for compliance purposes only. In recent years, there has been
increased interest on the part of LGUs, government agencies, and international
organizations in the assessment of LGU performances particularly in the areas of service
delivery and financial management. New systems were developed and improved to address
the concerns of improving LGU performance. The nature of these tools varied from LGU
self-assessment to national data collection and assessment.
23.
The Local Government Performance Measurement System (LGPMS) of the DILG is
one of the more recent systems introduced to LGUs. First implemented on a national scale
in 2004, the LGPMS is innovative in many ways. One, it was a pioneering system which
utilized the power of information technology as a means accessing the database. Two, the
development of the system involved consultative processes and mechanisms especially in
the identification of performance indicators. Third, it emphasizes on LGU self-assessment
and local teams as opposed to the traditional national data collection processes.
24.
The LGPMS performance framework covers two assessment concerns. First, the
LGPMS guides LGUs in assessing organizational performance by determining strengths
and weaknesses in the performance of their roles and responsibilities and service delivery
across 5 performance areas and 17 service areas. Second, the system also provides the
LGUs with an instrument for determining the socio-economic and environmental
development in a locality using selected outcome or development indicators.
25.
After several years of implementation, the system experienced errors in connectivity
affecting data entry and report generation capabilities. At the start of Component C, the
following issues were encountered during the re-development process:
LGPMS not accessible to all defined and target users

Improvement of the infrastructure support to LGPMS
No concrete data management plan
Capacity of users in system management
26.
In addition, understanding the real purpose of the system was also misunderstood.
Many LGUs mistook the self-assessment intention of the system for scorecard thereby
affecting the integrity of data collection and assessment. The obvious lack of database in
many LGUs also affected the data capturing process, as LGus have no available data to
respond to the LGPMS performance indicators.
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Final Report
May 2010
The DILG, with the technical assistance of the Asian Development Bank (ADB), is currently
addressing these concerns. The LGPMS is now back as an internet database system. The
LGPMS indicators were reviewed and revised to be more user-friendly and to address the
unavailability of some indicators. Financial indicators coming from the Bureau of Local
Government Finances (BLGF) Local Governance Financial Performance Measurement
System (LGFPMS) were also incorporated as part of the performance indicators of the
LGPMS. The systems administration and management systems are also being
strengthened.
27.
The main challenge for the system, however, lies in the utilization of the LGPMS
performance reports for improving overall LGU management particularly in service delivery
and improving financial performance. Component C of ADB TA 7019 would complement
other ADB TA on LGPMS. Component C objectives are as follows:
.
III.
a.
To improve the LGPMS Manual with the incorporation of new LGPMS

indicators developed under the TA 4778
b.
To improve the system for monitoring and analyzing overall LGU performance
through the development of a framework for analysis that links governance
with revenue performance and service delivery
c.
To promote utilization of LGPMS data through the annual LGU Performance

Report
d.
To improve the LGPMS system design specifically in the areas of system

usability, performance and scalability, infrastructure and system management
Project Deliverables: Rationale and Performance

A.
Component A
28.
The deliverables of Component A were calibrated to meet the three objectives: a) the
creation or institutionalization of the Coordinating Committee on Decentralization, b)
progress on selected LGFBR-related policy reforms, and c) the creation and capacitating of
the CCD technical secretariat. The achievement of the second objectives is related to the
achievement of the first since it was by jointly working at these key reforms that the
members of the CCD moved towards institutionalizing the body. The following table presents
the deliverables in the Inception Report versus the Actual Deliverables:
Table 1: Component A - Summary of Project Deliverables: Actual Vs. Expected.
EXPECTED
ACTUAL
REMARKS
Main Task 1: Provide Technical Support for the interim CCD and the interim-CCD and CCD
Agenda:
1. Draft first year (1-year) CCD 1.1 Draft first year agenda for Completed on schedule.
interim agenda for approval of Interim CCD.
DILG and interim CCD.
2. Draft medium-term agenda (5- 2. LGU Medium-Term Agenda, Draft version under review by
years) for CCD.
2010-2015.
CCD. Finalization by project
end. Agenda is being prepared
for next administration and will
apply to activities within and
outside of the CCD.
3. Workshop/consultation with 3. First consultation conducted Completed
but
more
CCD members on medium-term in October 2009.
consultations will be conducted
agenda
to finalize.
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Final Report
May 2010

EXPECTED
ACTUAL
REMARKS
4.
Finalized
medium-term Ongoing.
Finalization in 2010.
agenda for CCD.
5.
Technical/Policy/Advocacy 5.1 Policy note and Draft Joint Completed. As per request of
Advisory Reports (TPAAR):
Memorandum Circular for DILG, a JMC was drafted to
Harmonization of JMC 2007-1
DILG and DBM on the impose sanctions for LGU
Implementation of Section projects funded by local budgets
287 of Local Government that are not included in the
Code of 1991.
Comprehensive
Development
5.2 Status Report on JMC Roll- Plan (CDP). Sanctions will be
Out (Presentation for CCD implemented
by
DBM as
Executive Committee).
provided under the Code.
6.
Technical/Policy/Advocacy No longer taken up.
The CCD focused on more
pressing issues. Land use
Harmonization of Land Use
planning was addressed under
Planning
LGU-NG
CoComponent B.
Management Issues
7.
Technical/Policy/Advocacy 7.1 Revised Draft Bill Amending Completed ahead of schedule.
Advisory Reports (TPAAR): Tax
Tax Provisions of the Local The bill underwent several
Amendments to the Local
Government Code of 1991 reiterations before endorsement
Government Code
House Version.
by CCD.
7.2 Revised Draft Bill Amending
Tax Provisions of the Local
Government Code of 1991
Senate Version.
7.3 Highlights of the Proposed
Local Tax Amendments to
the Local Government Code
of
1991
(PowerPoint
Presentation).
8.
Technical/Policy/Advocacy
Review of improvements in the
release of intergovernmental
transfers IRA, special shares,
VAT
9.
Implementation
of
further
devolution without legislative
action in the Department of
Agriculture,
Department
of
Environment
and
Natural
Resources,
Department
of
Health, and Department of
Social Welfare and Development
7.4 Advocacy Plan for Book

II Amendments.
8.1 Technical Report No. 3:

Initial Comments on JICAfunded Study on the
Improvement of the Internal
Revenue Allotment (IRA)
System in the Philippines.
8.2 Briefing Material on IRA
Study (for Legislature).
8.3 Legal Comments on the
Study on the Improvement
of the Internal Revenue
Allotment (IRA) System in
the Philippines.
8.4 Comments on IRA Study
Additional Work.
8.5 Reformulating the Internal
Revenue
Allotment:
Prospects
for
Cities
(Presentation
for
the
League of Cities of the
Philippines
by
DILG
Undersecretary
Austere
Panadero).
9.1
First Policy Memo on
Further
Devolution
in
Selected
National
Government
Agencies:
Initial Observations and
Next Steps.
9.2
Position
Papers
for
Further
Devolution
of
Service Delivery: Selected
Agencies under Executive
Review of IRA study requested

by DILG for inclusion in CCD
agenda and LGU Medium-Term
Roadmap, 2010-2015.
Draft policy position paper to be

distributed to LGU Leagues in
December 2009. Consultation to
be held in January 2010. Final
draft to be completed in January
2010 for endorsement by LGU
Leagues to next administration.
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Final Report
May 2010

EXPECTED
ACTUAL
REMARKS
as recommended by the LGU
Order 444 (Presentation for
Leagues.
Working
Group
on
Decentralization and Local
Government, Government
Side (NG and LGU))
9.3
Draft Policy Position
paper on Further Devolution
in Agriculture, Environment
and Natural Resources,
Health and Social Welfare
and Development.
10. Technical/Policy/Advocacy Policy paper completed in May Completed study outputs of ADB
Advisory Reports (TPAAR): 2010.
TA 4778 will be integrated into a
Review
of
non-tax,
fiscal
policy paper for completion in
amendments to the Local
February 2010 and inclusion in
Government Code of 1991 IRA
LGU Medium-Term Roadmap,
formula, share of LGUs in
2010-2015 in February 2010.
national wealth, basis of IRA
However,
selected
policy
computation, LGU depository
reforms
have
been
accounts in private banks, share
recommended by the Team to
of LGUs in road users fund, etc.
the LGFBR-2 policy reform
agenda including policy reforms
on local government financing
and access of LGUs to Official
Development Assistance (ODA).
11. Technical/Policy/Advocacy Policy paper completed in March Resulting from the review of
Advisory Reports (TPAAR): 2010.
policy position paper on first four
Review of further devolution
pilot
sectoral
agencies,
without legislative action in other
substitutions
for
the
four
key
national
government
agencies will be discussed (e.g.,
agencies
such
as
the
Public Works in place of
Department of Public Works and
Agriculture).
Completion
in
Highways,
January 2010.
12. Technical/Policy/Advocacy 14.1 Terms of Reference on Completed ahead of schedule.
Economic
Impact
of Policy memo replaced by TOR
Federalism by the year 2012.
Federalism.
as per request of DILG.
14.2 Technical Paper No. 1:
Local
Tax
Reform
Initiatives and the Drive
towards Federalism in
the Philippines.
13. Technical/Policy/Advocacy Ongoing. Awaiting final outputs Completed study outputs of ADB
Advisory Reports (TPAAR): of ADB TA 4778,
TA 4778 will be integrated into a
Review
of
the
non-fiscal
policy paper for completion in
amendments to the Local
February 2010 and inclusion in
Government Code of 1991.
LGU Medium-Term Roadmap,
2010-2015 in February 2010.
14. Draft Memorandum of Draft position papers completed. Output was redefined in MidAgreement
between
LGU
Term Report as LGU Leagues
Leagues and Department of
Endorsed position papers on
Agriculture,
Department
of
further devolution in four (4)
Environment
and
Natural
sectoral
agencies.
Position
Resources,
Department
of
papers will be prepared for
Health, and Department of
consideration
of
next
Social Welfare and Development
administration. Completion of
on further devolution of functions
drafts January 2010.
to LGUs.
15. Technical/Policy/Advocacy 15.1 First Policy Memo on Completed.
Policy
support
Devolution
and
Local included quick-policy response
Issues recommended by CCD
Government Trust Fund.
for legislative initiatives requiring
15.2 Second Policy Memo on DILG positions and assistance
Devolution
and
Local for CCD policy reforms. Number
Government Trust Fund.
of additional reforms issues
addressed are 2.4 times more
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Final Report
May 2010

EXPECTED
ACTUAL
REMARKS
15.3 Local
Service
Delivery that of original policy issues (10).
Study Terms of Reference.
15.4 Policy Memorandum on
House and Senate Bills on
Special Education Fund
and the Amusement Tax.
15.5 Comments
on
House
Committee
on
Local
Government Substitute Bill
for House Bills Nos. 389,
742, 1250, 2183, 2625,
3505, and 4367 Amending
the
Amusement
Tax
Provision in the Local
Government Code of 1991.
15.6 Comments on House Bill
No. 2452 and Senate Bill
No, 1645 the Valuation
Reform Act (VRA) and
House Bill 3514 the Real
Estate Service Act.
15.7 Technical Paper No. 2:
Towards A Cost Effective
System
for
Effecting
Real Property Valuation
Reforms in the Philippines.
15.8 A Technical Note on the
Local
Governance
Performance Management
System (LGPMS) and the
Community-Based
Monitoring
System
(CBMS).
15.9 Remaining
Issues
on
LGPMS-CBMS Technical
Note.
15.10 Stakeholder
Coordination in Activities
Supporting Decentralization
and Local Governance in
the
Philippines:
Initial
Thoughts on Status and
Issues.
15.11 Stakeholder
Coordination in Activities
Supporting
Governance
in
the
Philippines: Initial Thoughts
on Status and Issues
(PowerPoint Presentation).
15.12 Comments on ADB
PHCO LGU TAs for 2009
and 2010 Pipeline.
15.13 Technical Paper No. 1
(Revised for Legislature
Use): The Need for Local
Government
Finance
Reforms in the Face of
Charter Change Initiatives.
15.14 LGU
Credit
and
Financing
Issues
and
Recommendations
(Revised
for
CCD
Executive Committee)
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Final Report
May 2010

EXPECTED
ACTUAL
REMARKS
15.15 Overview
of
Accomplishments on Local
Government and Emerging
Work Activities for 20092010 Onwards (Working
Group on Decentralization
and Local Government,
Government
Side
Presentation
for
CCD
Executive Committee).
15.16 Mobilization of ODA
Support (Presentation for
CCD
Executive
Committee).
15.17 Decentralization
Experience
of
the
Philippines: Challenges and
Implications
on
Local
Government
Finance
(Working
Group
on
Government, Government
Side Presentation for
CCD
Executive
Committee).
15.18 Policy Memorandum
10 March 2009: Comments
on
Disaster
Risk
Management
(DRM)
Program Memo.
15.19 LGFBR Issue Paper
No. 1 Towards Enhancing
the Ability of LGUs to
Generate Revenues from
Business Taxes.
15.20 Initial Future LGFBR
Recommended
Policy
Reforms
15.21 Initial LGFBR Subprogram 3 Policy Inputs
June 1, 2009: Comments
on
NEDA
Letter
on
Imposition of the Idle Land
Tax.
August
12,
2009:
Comments on Overseas
Farm Investments.
15.24 Proposed 2009-2010
Work Plan Final Version
(September 3, 2009).
16.
CCD
Meetings
and Completed
with
two
(2) Since project start there have
Workshops
additional
CCD
meetings been twelve (14) CCD meetings
completed by May 2010.
conducted not counting small
group
meetings
and
consultations of the technical
staff.
th
Completed during 13
CCD Policy agenda to be revised prior
17.
Consultation,
meeting.
to project termination.
reformulation and finalization of
CCD Medium-Term Roadmap
consolidating policy concerns
from ADB TA 4556, ADB TA
4778 and LGFBR-2.
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Final Report
May 2010

EXPECTED
ACTUAL
REMARKS
Paper electronically submitted to
18.
Drafting of policy paper Completed in May 2010.
DILG for distribution.
consolidating policy issues on
decentralization from recent ADB
and other donor studies.
th
Completed after 13
CCD Policy agenda submitted to
19.
Consultation and
meeting.
CCD.
finalization of CCD short-term
policy agenda.
Completed in May 2010.
500 copies submitted to DILG.
20. Publication of
Decentralization Studies
completed under ADB TA 7019.
Three (3) copies submitted to
21. Conduct of legal study on
DILG.
recommendations of ADB TA
7019 Status of Devolution Study.
Main Task 2 Facilitate the creation of the Coordination Committee on Decentralization (CCD):
1. Draft concept paper for
expanding the agenda of the
MOUs Executive Committee.
2. Draft implementing guidelines
for JMC 2007-1 and MOU, if
necessary
1. Policy Memorandum on JMC

2007-1 Executive Committee as
Interim CCD.
2. Review of DILG-DBM-DOFNEDA JMC 2007-1 MOU.
3.
Discussion
paper
on
modalities for CCD structure.
3. CCD Briefing Material.
4. Workshop on modalities for

CCD
structure
including
relationship
with
other
coordinating committees and
first year agenda.
5. Draft organizational structure
for
CCD
with
technical
secretariat based on chosen
modality.
6. Draft operational guidelines
for CCD.
7. Terms of reference for
technical secretariat
8. Workshop/consultation with
CCD
members
on
draft
operational guidelines.
9.
Finalized
operational
guidelines.
10. Draft executive issuance for
creation of CCD.
4. CCD Meetings.
Completed.
Review found the IRR to be
unnecessary since agenda could
not be legally expanded under
the JMC 2007-1.
CCD Briefing material contained
the various modalities and was
subject to several iterations
before finalization.
Completed.
CCD Final Memorandum

Understanding.
of
Completed
and
November 2009.
signed

Understanding.
Understanding.
CCD Meeting.
of
Completed
and
November 2009.
Completed
and
November 2009.
Completed.
signed
signed

Understanding.
Understanding.
of
Completed
and
November 2009.
Completed
and
November 2009.
signed
signed
of
of
Main Task 3 - Facilitate the creation of a CCD Technical Secretariat:

1. Draft Manual of Operations
and
Continuing
Research
Agenda for CCD Secretariat
2. Orientation Workshop for
CCD Secretariat
3. Finalized draft manual of
operations
and
continuing
research agenda for CCD
secretariat
Operating
Guidelines
and
Recommendations for further
capacitation of CCD Technical
Secretariat.
Training Workshop.
Completed in April 2010.
Operating
Guidelines
and
Recommendations for further
capacitation of CCD Technical
Secretariat.
Completed in April 2010.
Page | 14

Final Report
May 2010
29.
The deliverables for main task 1 were designed to provide the DILG and CCD
members with technical assistance on both a pre-selected set of policy concerns for the
purpose of addressing these concerns as well as acclimate them to working with each other
as a body paving the way for the formalization of the CCD. As noted in the table above, only
one policy concern (i.e., NG-LGU Co-Management Issues) did not meet the interest of either
the DILG or the CCD. At the beginning of the project, ten (10) policy issues were preidentified but nine (9) were actively taken up with at one policy outputs generated for the
policy issue and twenty-four (24) additional policy outputs generated for policy issues outside
of the original ten. By this writing of this report, the number of policy outputs generated
exceeded the original count by at least 2.4 times. The additional policy outputs were either
quick-policy response memorandum requested by the DILG for urgent policy issues such as
legislative measures to decrease the local Amusement Tax and creating an additional
bureaucracy for land valuation to issues papers on LGU Access to ODA and local credit
financing and the formulation of the governments (i.e., National and Local Government)
position for the Philippine Development Forum Working Group on Decentralization and Local
Government annual workplan.
30.
The deliverables for main task 2 were designed to formalize the Coordinating
Committee on Decentralization, its membership and structure, scope of work, relation to
other agencies, and technical secretariat. After much deliberation, the legal instrument
decided upon was a Memorandum of Understanding which was signed by both the oversight
agency members (i.e., DILG, DOF, DBM, and NEDA) and the LGU Leagues (i.e., LPP, LMP,
LCP, LnB, and ULAP) last November 2009. A welcome development occurred during the
deliberations which resulted in the agreed expansion of the powers of the CCD. In earlier
deliberations, it was agreed that the role of the CCD was to address issues which did not
require the reconstitution of the much larger, multi-sectoral Oversight Committee on
Devolution (OCD). However, upon the request of the DBM, the group has decided to
become the body which would trigger the reconvening of the OCD to address policy issues
that is beyond the authority of the CCD members. An example of such policy issue is the
determination of the release of the IRA shares based on new census data. This policy issue
will be discussed in the next CCD meeting as well as an agreement on how to trigger the
recovening of the CCD possibly through a CCD resolution and a MOU with the Office of the
President.
31.
The deliverables for the third task have been completed by project end with
recommendations for further assistance to the CCD Technical Secretariat included in this
final report. However, part of this assistance is being provided in the upcoming LGFBR
Subprogram 2 TA.
B.
32.
Component B
The principal deliverables under Component consist of the following:

a. Enhanced Guide to Comprehensive Development Plan Preparation This
is designed as a reference document that can assist LGOOs and/or local
planning and development officers in facilitating the formulation of a CDP
and LDIP.
b. Training Modules and Session Guides for the Conduct of Courses on
CDP Preparation The training modules and session guides for both the
Introductory Course and Intensive Course on CDP Preparation are the
same, except that the latter includes hands-on exercises on the
application of tools and techniques for the sectoral profiles and plan
development.
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Final Report
May 2010
c. Cross-Referencing Guide This is a matrix of suggested tools and

techniques for planning, investment programming and plan monitoring
and evaluation extracted from the various manuals and guidebooks
prepared by NEDA, DBM and DOF in addition to those contained in the
RPS Sourcebook. This will allow users of the Guide to select the
appropriate tool or adopt a technique based on his/her capability and
appreciation of such tool or technique.
d. Reports on Consultation-Dialogues with HLURB, DBM and other National
Government Agencies Engagement with HLURB will seek to establish
and clarify relationships between the CLUP and CDP preparation process
and guidebook; delineate and clearly spell out functional responsibilities
and areas for dovetailing one from the other; and describe points of
interface between the CLUP and CDP.
Expected output from this engagement is a Joint Memorandum Circular between
DILG and HLURB articulating the above.
33.
Discussions with DBM are expected to yield the following results:

a. Funnelling of the five (5) development sectors of the CDP into the three
(3) budgetary sectors.
b. Agreement of the definition of
investment program and other terms used
in local development investment programming.
34.
Meetings with other national government agencies are envisioned to draw out
consensus on how thematic/cross-sectoral or sectoral concerns can be mainstreamed or
integrated not only in the CDP preparation process but more importantly, in the rationalized
local planning system.
35.
Some of the agencies identified for this purpose are the National Council on the Role
of Filipino Women (NCRFW) for Gender and Development; National Disaster Coordinating
Council (NDCC) for Disaster Risk Reduction and Management Plan; National Commission
on Indigenous Peoples (NCIP) for the Ancestral Domain Sustainable Development and
Protection Plan (ADSDPP); Council for the Welfare of Children for the protection of children
and promotion of childrens rights; National Police Commission/National Security Council for
the Peace and Security Plan; etc.
1.
2.
3.
Table 2: Component B - Summary of Project Deliverables: Actual Vs. Expected.

Expected
Actual
Remarks
Training Modules and
1. Training Modules and
The training modules and
Session Guides for the
Session Guides for the
session guides have been
Introductory Course on
Introductory Course on
updated and revised based
RPS and CDP
RPS and CDP
on comments and
Preparation
Preparation
suggestions forwarded by
the participants. They have
Training Modules and
2. Training Modules and
also undergone further
Session ides for the
Session ides for the
refinements based
Intensive Course on RPS
Intensive Course on
innovations conceived by the
and CDP Preparation
RPS and CDP
Consultants as the training
Preparation
programs were being
conducted in order to
simplify and make them
more user-friendly.
Enhanced Guide to CDP
3. Enhanced Guide to CDP A Guide to Ecological
Preparation
Preparation and Guide
Profiling was also prepared
to Ecological Profiling
as a companion document
Page | 16

Final Report
May 2010

Expected
Actual
Remarks
instead of being integrated in
the Enhanced Guide to CDP
Preparation. This is in
response to suggestions that
a Guide to Ecological
Profiling be packaged
separately from the Guide to
CDP Preparation.
4.
Results of ConsultationDialogues/Discussion
Conferences with
Selected National
Government Agencies
With HLURB:
a)
b)
c)
Joint Memorandum
Circular to define roles
and responsibilities
between DILG and
HLURB in the local
planning process
Joint Memorandum Circular

No. 001 series of 2009
(Guidelines on the
Harmonization of the CLUP
and CDP Preparation) signed
on October 19, 2009
Strategies for planning

assistance under
various planning
scenarios in the LGU,
i.e., where there is an
existing CLUP but no
CDP; where the present
CLUP covers the
elements of the CDP;
where there is only an
CDP, but no CDP, etc.
A common training
program on the plan
formulation process
where shared activities
and points of departure
are identified to yield
two plan documents:
the CLUP and the CDP.
Harmonization and
integration of the five (5)
development sectors in
the CDP and the three
(3) sectors as indicated
in the UBOM
b)
Agreement on the
definition of terms used
in local development
investment programming
enunciated in the RPS
b.
to explore the
possibility of utilizing a
common training
module for both the
CLUP and CDP
process to facilitate
such collaboration; and
c.
to define the roles and

responsibilities of each
agency in relation to
land use and
comprehensive
st
Items b) and c) under the 1

Column will be tackled in
subsequent dialogues with
HLURB which may be
undertaken beyond the term
of TA 7019. These
dialogues are envisioned to
yield a set of Implementing
Rules and Regulations of the
JMC
With DBM
a)
This covers discussions to:

a. clarify and forge a
collaborative
arrangement between
DILG and HLURB
towards dovetailing the
CDP preparation process
with the CLUP and viceversa;
a)
Memorandum Circular
No. 2008-154 dated
October 16, 2008,
entitled Reconciliation
of the Five
Development Sectors
in the Comprehensive
Development Plan and
Three Sectoral
Classifications with the
Annual Investment
Program
The section on LDIP in the

CDP Guide has been
transmitted to DBM for their
review and comments prior
to actual face-to-face
discussions. The very tight
schedule of DBM officers did
not allow enough time to
deliberate on these items.
Cursory exchanges of ideas,
however, resulted in
agreements in principle.
Page | 17

Final Report
May 2010

Expected
Actual
Remarks
and adopted in the
Further discussions have to
be pursued and official
Preparation
statements from both DILG
and DBM approving and
adopting these terms are
desired.
With Selected National
Government Agencies
Consensus on Mainstreaming
Sectoral, Cross-Sectoral and
Thematic Concerns in the
RPS and CDP
Series of dialogues and

consultation-coordination
meetings conducted.
With Selected National

Government Agencies
(Contd.)
NGAs concerned agreed to

consider and take the
necessary actions to
mainstream their concerns in
the RPS and CDP process,
e.g. NCRFW has already
drafted its Supplemental
Guide to mainstream GAD in
the RPS and CDP; POPDEV
has also embarked on the
same initiative; NCIP also
committed to review and
consider harmonizing the
ADSDPP preparation
process with that of the CDP
within the framework of the
RPS.
Follow-up sessions with
other agencies, e.g., DA,
DENR, CWC, National
Council for Disability Affairs
have to be pursued to
address the multiplicity of
plans and duplication of plan
preparation processes at the
local level and to ensure the
adoption of the RPS as the
local planning framework.
Consensus on Mainstreaming
Sectoral, Cross-Sectoral and
Thematic Concerns in the
RPS and CDP
4.
Cross-Referencing
Guide for CDP
Preparation
Review and Comments on

the Cross-Referencing Guide
Prepared under the auspices
of the Deutsche Gesellschaft
fr Technische
Zusammenarbeit (GTZ)
submitted for consideration
and possible incorporation in
the Guide.
To avoid duplication of
efforts, the development of a
Cross-Referencing Guide
was dropped in deference to
the initiative made by GTZ in
preparing such Guide.
5.
Manual on Local
Planning Database
Draft completed.
Final version completed in

May 2010.
36.
In the course of the project period, Component B conducted twelve (11) training
activities covering all regions except for the Autonomous Region of Muslim Mindanao. The
total number of person trained is 658 which is 54.8% higher than the 425 persons trained
committed under the Inception Report.
Page | 18

Final Report
May 2010
Table 3: Summary of Training Activities under Component B

No. Of
Regions
Intensive Course Workshop
Participants
Cluster I
Reg. I, II, III, IVb, V, CAR , NCR

Reg. IVa, VI, VII, VIII, IX, X, XI,
XII, CARAGA
21
27
Cluster I
Reg. VI, VII, VIII
97
Cluster II
Reg. II, III
72
Cluster III
Reg. IX, XII
50
Cluster IV
Reg. X, XI, CARAGA (XIII)
68
Cluster V
Reg. I, CAR
58
Cluster VI
Reg. IVa, IVb, V
83
Cluster VII
NCR
88
16
516
16
67
Cluster II
No. Of Pax
Introductory Course Workshops
Total
Writeshop on Utilizing
Ecological Profile on CDP
Reg. I, II, III, IVA, IVB, V, VI, VII,

VIII, IX, X, XI, XII, CARAGA, CAR,
DILG C.O.
Harmonization of CLUP and

CDP
Reg. I, II, III, IVa, IVb, NCR , DILG

C.O.
Grand Total
27
658
Findings of Local Planning Database Management Study Report

37.
The Study was initiated by Undersecretary Austere Panadero of the Department of
Interior and Local Government (DILG) as a component of ADB Technical Assistance 7019,
Local Government Finance and Budget Reform Project. Undersecretary Panadero sought to
assess the status of local databases in view of its thrust to implement the Joint
Memorandum Circular on Local Planning. The objective of this Study is to assess the status
of local databases and data management systems and determine areas for improvement to
provide local planning initiatives with reliable, adequate and updated data.
38.
The Study covers the following activities:

1.1.1
Determine status of database for planning at the Local Government

Unit (LGU) level in terms of:
a) available existing primary and secondary data. Identify sources of
such data,
b) additional/inadequate/lacking required primary and secondary
data,
c) identify sources of such data,
Page | 19

Final Report
May 2010
d) assess status of data in terms of scope of data, level of

aggregation and frequency of generation/updating, and
e) determine availability/presence of local data systems such as
Community Based Monitoring System (CBMS) and Minimum Basic
Needs (MBN) among others.
1.1.2
Determine status of data management systems in each class/type of

LGU, among LGUs, between LGUs and external agencies/sources
such as National Government Agencies (NGAs), Non-government
Organizations (NGOs) and community organizations.
1.1.3
Identify and assess institutional arrangements for:

a)
b)
c)
d)
1.1.4
data generation, collection and updating

data collation, data processing and analysis
data storage and management
data usage
Formulate manual for improving local databases and data

management systems comprising of data generation, collection,
collation, processing, management, storage and retrieval systems.
a) Determine data management systems requirements by type/class
of LGU.
b) Determine financial and technical assistance requirements for
improving local data systems.
c) Develop and pilot test improved local database and data management
system in at least three LGUs
39.
As a result of the survey of the study LGUs, the following strategic principles have
been identified for the manual:
a.
It is imperative that adequate, accurate and timely data be made

available in local governments in a comprehensible and readily usable
form at all times. The database should address specific needs and
functional requirements of different types of local governments and
should not be collected to complete an ideal, comprehensive data set.
b.
The database for different types of local governments should be

appropriate to their technical and financial capability while providing
them with the database that fulfils their specific needs. It should also
conform to the tight manpower and financial resources; and culture of
multi-tasking in local governments. Thus, the database management
system should be simple, user-friendly and cost efficient.
c.
Local governments are not presently inclined to invest time and

resources to establishing and operating a database management
system. In the total spectrum of needs of their constituencies and
range of demands for limited resources, database management
system is definitely not a priority. Though the need for it is
acknowledged by some local officials, its importance is not widely
appreciated and much less understood. Countless programs and
projects have been thrown local governments way but many have
fallen by the wayside as white elephants; have been largely ignored
Page | 20

Final Report
May 2010
by local governments; or have failed miserably to attain their purported

objectives and goals. Thus, a program on improving database
management systems should be local government driven and not
national government or donor driven. Policy gaps which hamper
improved performance and local governance should be addressed in
a comprehensive and integrated manner. The incentive framework to
promote local development; improved local governance and greater
equity among local governments should be evaluated, improved and
efficiently adopted.
40.
Based on these principles, the local database management system must be
anchored on the following pillars:
a.
Collection of accurate and timely data both at the barangay (primary)

and sectoral office level (secondary).
b.
Processing of data in a systematic fashion, regular basis and in a

readily accessible, usable and comprehensible form.
c.
Formulation of policy framework and incentive mechanisms to foster

greater understanding among local government officials of the
importance and benefit of local database management systems; to
encourage and promote its use; and to support local governments
establish, operate and maintain database management systems.
41.
This will result in a local database management system with the following
components:
a.
b.
Collection of accurate and timely data

i.
Delineation of set of core data according to specific data needs of

local governments by type (city or municipality); by class (say,
Highly Urbanized City, Ist Class City/Municipality; 2nd and 3rd Class
City/Municipality; 4th and 5th Class City/Municipality). An initial set
of core data2 has been identified in consultation with local
governments met during the Validation Survey and staff of the
League of Cities and League of Municipalities.
Further
discussions with local government officials will be undertaken and
consultation with local government experts will be held to get a
wider view of what the core data set should be.
ii.
Design of barangay survey based on set of core data
iii.
Design of system for collecting data from sectoral offices
iv.
Determination of frequency of updating specific data and

formulation of methodology/design of system for updating
barangay and sectoral office data.
Processing of data into readily accessible, usable and comprehensible
form
Annex 3 List of Core Data.

Page | 21

Final Report
May 2010
i. Formulation of manual to process barangay based and data

generated by sectoral offices
ii. Determination of data requirements (based on set of core data
identified) for each functional use. Based on discussions with local
government officials and staff and the results of the surveys, the
following are the main functional uses of data:
ii.1.
provide data for planning;
ii.2.
provide a basis for efficient, well-targeted service delivery;
ii.3.
serve as a platform for identification of key issues and critical

problems both at the community/barangay and city/ municipal
level;
ii.4.
provide an empirical basis for sound decision-making of the

Mayors and Sanggunians including budget review, preparation
and approval;
ii.5.
present a basis for identification of

performance indicators;
ii.6.
provide a basis for

program and project identification,
preparation, prioritization, programming and design;
ii.7.
maximization of resource mobilization and revenue generation

potential;
ii.8.
provide basis for local economic development planning,

product marketing and investment promotion.
benchmarks and
c. Design of report forms for each type of functional use.

i. Formulation of proposals for improving policy framework and incentive
mechanism for local database management.
C.
42.
Component C:
The highlights of the Component C activities are the following:

a. Enhance/develop analytical framework for utilizing LGPMS assessment
results in LGU operations including planning and budgeting, monitoring
and evaluation, capacity development, application in performance-based
grant system, policy development.
b. Develop utilization manual for LGPMS that links LGU performance data to
LGU planning and budgeting.
c. Train select core DILG personnel on the practical application of LGPMS.
d. Provision of technical assistance in the development of the LGPMS online database system
Page | 22

Final Report
May 2010
43.
These activities were completed in the pursuit of completing the deliverables of the
component. Overall, the key component deliverables were accomplished. The following
table summarizes the actual accomplishments for Component C compared to the expected
deliverables.
Table 4: Component C - Summary of Project Deliverables: Actual Vs. Expected.
Expected Deliverables
Actual Accomplishment
Remarks
An analytical framework and The final manual LGPMS utilization Various uses of the LGPMS
manual on strengthening the manual is completed and submitted were introduced and enhanced
the
analytical in the course of the CDP
strategic links of the LGPMS incorporating
results for improving LGU framework for utilizing the various training under component B
overall
performance
in LGPMS on-line reports
service delivery and revenue
generation
The use of LGPMS data particularly Core DILG staff were trained
Promotion and advocacy on
in
comprehensive
development on
LGPMS
information
the use of the LGPMS data
planning (CDP) was introduced and utilization by linking utilizing
advocated during the CDP training. LGPMS reports to CDP
The CDP training was participated by processes and in capacity
DILG regional and provincial focal development planning
persons as well as select LGU
participants. The training were
conducted in cluster to wit:
Regions 6,7 & 8) held in Cebu
City
Regions 2 & 3 held in Clark,
Pampanga
Regions 9 & 12 held in
Zamboanga City
Regions 10, 11 & 13 held in
Davao City
Regions 1 & CAR held in Baguio
City
Regions 4a, 4b & 5 held in
Quezon City
NCR held in Quezon City
Recommendations on the
administrative mechanism/
institutional
linkages
between
LGUs,
BLGS,
regional offices and other
concerned NGAs
Recommendations on the
LGPMS
and
LGFPMS
system linkages for data
sharing
In addition, 2 intensive courses were

also conducted for the DILG training
facilitators.
Drafted
administrative
and
sustainability mechanisms for the
LGPMS
Reviewed
the
management
system for LGPMS
Presented recommendations for
improving existing management
structure with the end view of
sustaining
the
LGPMS
operations and processes within
the DILG.
Recommendations on the LGPMSLGFPMS
complementation
are
highlighted by the following:
Incorporation of the 11 out of the
19 finance indicators into the
LGPMS
Initial
agreements
on
the
possible data sharing for the 2
systems
Conduct of the initial assessment
for the technical requirements of
the
possible
data
sharing
between the LGPMS and the
Delays in the LGPMS system

development affected the
testing and exploration of
possible
functional
complementation of the 2
systems. At this time, the
integration is based on the
use of key financial indicators
as part of the performance
indicators of the LGPMS.
Page | 23

Final Report
May 2010
Table 4: Component C - Summary of Project Deliverables: Actual Vs. Expected.

Expected Deliverables
Actual Accomplishment
Remarks
LGFPMS
Operational requirement for the
system
complementation
is
affected by the different data
updating requirement of the
LGPMS and the LGFPMS.
LGPMS
is
LGU
based
assessment while the LGFPMS
is based on centralized analysis
based on the submission of the
LGU statement of Income and
Expenditures (SIE).
Another key question is the data
entry timing specifically whether
the SIE will be available during
rd
the data capture during 3
th
quarter or early 4 quarter.
Basic
recommendation
for
integration includes that the data
gathering and entry of the 11
finance indicators at the LGU
level. This means that the LGU
proceed with the data capture
using the LGPMS data capture.
Another suggestion is for a data
review of data sources for the
finance indicators be done to
properly guide the LGUs in
referencing the LGPMS data
capture. The objective of the
review is to minimize the
possible discrepancy in data
sources for the both the LGPMS
and LGFPMS.
Inputs in this deliverables
Recommendations on the Support to system development
were coordinated with the
improvement of LGPMS completed and delivered particularly
designated system developer,
system
design
and with the following services:
the ASIAGATE, which was
accessibility
Provision of technical inputs to already contracted at the start

system design and architecture
of the component activities
Technical coordination on with

DILG-BLGS and ASIAGATE on
the system development and
implementation
Support in the analysis of

LGPMS system infrastructure
requirements
Research and provision of

advisory service on the selection
of a hosting service provider and
hardware requirements
Consultations
and
coaching
activities for the completion of
the LGPMS data management
plan
Recommendations on LGPMS
system
management
and
sustainability plan
Page | 24

Final Report
IV.
May 2010
Outcome and Assessment of Project Deliverables

A.
Component A
44.
As a result of the outputs of Component A, the following outcomes are being
targeted:
a.
Fully-functioning Coordinating Committee on Devolution (CCD) that meets

every month and institutionalized through an executive issuance.
b.
Approved medium-term agenda for CCD.
c.
Fully-functioning CCD Technical Secretariat.
d.
Legislation passed on the Executive and LGU League-endorsed tax

amendments to the Local Government Code of 1991.
e.
Signed Memorandum of Agreements between LGU Leagues and the

Resources, Department of Social Welfare and Development, and Department
of Health on further devolution of functions to LGUs.
The table below presents the assessment of the outcomes.

Table 5: Component A - Deliverables, Expected Outcome, Actual Outcome and Assessment
Deliverable
Expected Outcome
Actual Outcome
Assessment
Main Task 1: Provide 1.1
Legislation Draft
consensus In
spite
of
Technical Support for
passed
on
the Congressional
and overwhelming support
the interim CCD and
Executive and LGU Senate
bill
was from
the
oversight
the interim-CCD and
League-endorsed
tax completed with support agencies and the LGU
CCD Agenda:
amendments to the from oversight agencies Leagues,
the
draft
Local
Government and LGU Leagues. In legislation failed to pass
Code of 1991.
addition, draft bill was due to inaction from the
submitted
with legislature.
Although
endorsements from the the legislature was
Secretary of the DILG, consulted in various
the
Leagues
of stages of the bill
Provinces, and the drafting, support for the
League
of
Cities. filing of the bill was not
However,
House explicit. Although one
Committee on Local claim
was
that
Government declined congressman felt that
on filing the bill due to the bill had too many
the claim that this amendments,
these
would not be supported were mostly of the
by congressmen due to same
nature
(e.g.,
the
number
of increases in existing
measures. Bills are local tax rates). There
currently still endorsed was an unanticipated
by the CCD and will dynamic between the
passed on to the next LGUs
and
the
Administration
and legislature which the
Congress.
project
could
not
identify and could only
be
attributed
to
conflicting
interests
among the parties. It
could also be the case
that the measure did
not
provide
any
incentive
for
the
Page | 25

Final Report
May 2010
legislature to work on.
On the other hand, the
bill remains in the
agenda of the CCD
which may find a better
chance of passing with
a new set of legislators.
1.2
1.3
Signed
Memorandum
of
Agreements
between
LGU Leagues and the
Department
of
Agriculture, Department
of Environment and
Natural
Resources,
Department of Social
Welfare
and
Development,
and
Department of Health
on further devolution of
functions to LGUs.
As of the mid-term
report
it
was
recommended by the
DILG that the objective
was to draft position
papers
for
further
devolution in selected
sectoral agencies which
would be endorsed by
the LGU Leagues to the
next
administration.
Drafts
have
been
completed
for
the
review of the LGU
Leagues
and
finalization in 2010.
The
probability
of
attaining MOA between
the LGUs and the
selected
sectoral
agencies
weakened
when resources for the
re-engineering of the
bureaucracy
became
scarce.
Furthermore,
policy environments in
agencies such as the
Department
of
Agriculture undertook a
reversal when senior
management
moved
toward
recentralizing
functions. The position
papers will be more
useful when a new
administration is in
place and more open to
further decentralization.
Approved
agenda
Draft completed on
LGU
Medium-Term
Roadmap, 2010-2015.
Draft will be finalized

after additional inputs
are included from the
CCD members.
The approach of having
the members get used
to working on policy
issues together before
formalizing the body
was very effective in
building
consensus
even among resistant
members.
However,
continuous
technical
assistance on policy
issues from donors is
needed to support the
body.
medium-term
for CCD.
Main
Task
2
Facilitate the creation

of the Coordination
Committee
on
Decentralization
(CCD)
2.1
Fullyfunctioning
Coordinating
Committee
on
Devolution (CCD) that
meets every month and
institutionalized through
an executive issuance.
CCD
institutionalized
through Memorandum
of
Understanding
between
oversight
agencies and LGU
Leagues.
Main
Task
3
Facilitate the creation
of a CCD Technical
Secretariat
3.1
Fullyfunctioning
CCD
Technical Secretariat.
CCD
technical
secretariat
legally
created in CCD MOU.
Capacity building to be
provided in 2010.
The
technical
secretariat will most
effective as agenda and
technical
assistance
managers given the
limited
number
of
personnel that can be
provided within the
bureaucracy.
Given
this,
continuous
technical assistance on
policy
issues
from
donors is needed to
support the technical
secretariat and the
CCD.
Page | 26

Final Report
May 2010
45.
Based on the table above, 3 out of the 5 outcomes have been achieved in full by the
end of the project in May 2009. These are the creation of the CCD, the creation of the CCD
Technical Secretariat, and the development and approval of a medium-term agenda. The
first two were completed through a signed Memorandum of Understanding and the third was
finalized as the LGU Medium-Term Roadmap, 2010-2015 for submission to the next
administration.
46.
Two outcomes the passage of legislation for increasing local taxes and
memorandum of agreement for further decentralization in selected national government
agencies such as Agriculture, Environment and Natural Resources, Health, and Social
Welfare and Development were substantially achieved. This means that the policy reform is
in place and will continue to be pursued with a likelihood of being achieved some time after
the project has concluded and in the next administration. With respect to legislation on
improving local taxes, it was the assessment of the team that although consensus and
support was achieved among the CCD members, it could not anticipate nor compensate for
the dynamic between the LGUs and the legislature. It was reported that there exists
underlying friction and competition between some members of Congress, who are also
members of the House Committee on Local Government, and local chief executives. This
resulted in resistance on the part of the legislature to file bills that would improve local
resource generation from taxes. This resistance was strong enough to bar the draft bill in
spite of consultations with the House Committee and letters of endorsements from the DILG
Secretary and the President of the League of Provinces of the Philippines and the League of
Municipalities of the Philippines. On the other hand, the CCD has not given up on the
proposed measures and will continue to pursue the filing of the bill and the advocacy of the
reform in the next administration when new congressional members will be elected.
However, this project also recommends that any pursuit of this reform in the next
administration study what incentives can motivate and be instituted in order to generate
congressional support for the reforms.
47.
A critical lesson learned from this project is the need to identify incentives on the part
of the legislature in the pursuit of policy reforms. A good example can be found in the
passing of legislation for the lowering of the local amusement tax. In spite of opposition from
the DILG, BLGF and the LGU Leagues, the legislature, both the Senate and the House of
Representatives passed the measure which contravenes the intent of the Local Government
Code of 1991 to improve local revenue generation. The local amusement tax is one of the
taxing powers of the province and city. However, strong support came from both Houses of
Congress because the measure was requested by the local entertainment industry
composed of film producers, actors, and theatre owners. Since local legislators gain
electoral mileage when endorsed by film celebrities, they ensured that the bill passed quickly
into law.
48.
On the matter of further decentralization in selected national government agencies,
executive support in the form of resources for re-engineering the bureaucracy was no longer
available thereby weakening the initiative. Movement in the policy agenda was heavily
contingent on the momentum brought about by the re-engineering agenda of the National
Government. This would provide the incentive for opening up the devolution of functions and
resources to the LGUs by ensuring that redundant central government agency function and
personnel would be compensated with a adequate retirement or separation package.
However, lack of resources, partly due to the financial crises, weakened executive support
for the agenda and the flow of resources. In addition, policy reversals were also being
implemented in some agencies such as the Department of Agriculture which was moving
towards re-nationalizing the devolved functions as well as calls on the part of some
provincial LGUs to re-nationalize their hospitals since they did not have the resources to
support their operation. By the mid-term report of this project, discussions with DILG moved
towards ensuring that the LGUs would have a position paper on further devolution in
Page | 27

Final Report
May 2010
selected sectoral agencies that they could present to the next administration for discussion.
The CCD has agreed to support the dialogue and move towards greater decentralization of
the functions with the position papers as the base. As with the local tax legislation, this policy
agenda is in place and has a likelihood of being achieved but sometime after the project has
terminated.
B.
Component B
49.
Overall, the desired ultimate outcomes of Component B are the adoption of Codecompliant CDP borne out of enhanced competencies of LGOOs to extend technical
assistance to LGUs and LPDCs in CDP and LDIP formulation within the framework of the
RPS and JMC No. 001 series of 2007; strengthened plan-to-budget linkage through the
investment program; integration of sectoral, cross-sectoral and/or thematic concerns and
plan documents mandated by law or advocated by some national government agencies in
the RPS and the CLUP and CDP.
Table 6: Component B - Deliverables, Expected Outcome, Actual Outcome and Assessment
ACTUAL OUTCOME &
DELIVERABLES
EXPECTED OUTCOME
ASSESSMENT
Training Modules and Session
Guides for the Introductory
and Intensive Courses on
RPS and CDP Preparation
LGOOs who participated in

either course:
a)
b)
c)
obtained deeper
appreciation and
understanding of the
processes,
methodologies, tools
and techniques for CDP
preparation;
acquired adequate
facilitation skills for
rolling out and echoing
the course at the LGU
level; and
attained satisfactory
level of competency in
extending technical
assistance to LGUs in
the formulation of Codecompliant CDPs and
LDIPs.
Assessment of the course in terms

of content, usefulness in current
job, delivery of presentations was
conducted using evaluation forms
designed for the purpose. This was
administered for each session at
the end of each module, at midcourse and at the end of the
course. (Please refer to
Assessment Results)
LGU and HLURB

representatives who were
invited during the
Introductory Course gained
new insights from the
introduction of the RPS,
JMC, CDP process and the
CLUP-CDP Interface.
Presentation
Joint Memorandum Circular to
Facility in echoing training

programs on CDP and LDIP
Preparation, as well as Plan
Monitoring and Evaluation
and extending technical
assistance to LGUs on the
same components of the
comprehensive development
planning cycle.
Harmonization of CLUP and
This has yet to be determined after

one planning cycle.
Page | 28

Final Report
May 2010
Table 6: Component B - Deliverables, Expected Outcome, Actual Outcome and Assessment

ACTUAL OUTCOME &
DELIVERABLES
EXPECTED OUTCOME
ASSESSMENT
define roles and
CDP preparation process
formulation and approval of the
responsibilities between DILG and guidebooks towards
Implementing Rules and
and HLURB in the local
completion and adoption of
Regulations of JMC No. 001 series
planning process
Code-compliant CLUPs and
of 2009.
CDPs.
Orientation-briefing on this JMC
participated in by selected technical
staff of HLURB and DILG was
conducted. Suggested inputs to
the IRR were submitted.
Harmonization and integration Effective and strengthened
of the five (5) development
plan-to-budget linkage
at least one planning cycle.
sectors in the CDP and the
through the investment
three (3) sectors as indicated
program.
in the UBOM
Cross-Referencing Guide for
Facility in the utilization of
CDP Preparation
suggested tools, techniques
at least one planning cycle.
and methodologies for
planning, investment
programming, revenue
administration, and
budgeting and expenditure
managements based on the
RPS Sourcebook and
preparation and the manuals
and guidebooks prepared by
NEDA, DBM and DOF.
C.
Component C:
50.
Modest outcomes are generated based on the Component C accomplishments and
deliverables. The highlights of these outcomes are the re-establishment of the LGPMS as
on-line system and the completion of the LGPMS utilization manual which provides guidance
to users in maximizing the LGPMS information in LGU planning, budgeting and capacity
51.
The table below summarizes the deliverables, outcomes and assessment of the
component C accomplishments.
Table 7: Component C - Deliverables, Expected Outcome, Actual Outcome and Assessment
Deliverables
Expected
Actual outcome
Assessment
Outcome
An analytical framework and Enhanced
LGPMS utilization manual The manual needs to be
manual on strengthening the analytical
completed
and properly
disseminated,
strategic links of the LGPMS framework and
demonstrates the various advocated and tested to
results for improving LGU utilization of the
uses of the LGPMS in LGUs and other users to
overall
performance
in LGPMS reports
relation to LGU basic fully appreciate the utility
service delivery and revenue
functions such as in of the tool.
generation
planning and budgeting
Promotion and advocacy on Core DILG staff Trained core DILG staff The training participants
the use of the LGPMS data
trained
on
the and selected LGU in the acquired
additional
utilization of the utilization of LGPMS in knowledge and skills in
LGPMS which is CDP
and
in
LGU demonstrating the use of
critical
in budgeting and capacity LGPMS in development
advocating the use development planning
planning and budgeting.
of the system for
Training participants have
LGU management
improved knowledge and
appreciation
of
the
purpose of the LGPMS
beyond the submission of
Page | 29

Final Report
May 2010
Table 7: Component C - Deliverables, Expected Outcome, Actual Outcome and Assessment

Deliverables
Expected
Actual outcome
Assessment
Outcome
LGU performance reports.
Recommendations on the Recommendation
Drafted recommendation Management
and
administrative mechanism/ for
system for
improving
system sustainability
measures
institutional
linkages management and management
and needs to be formalized
between
LGUs,
BLGS, sustainability
sustainability
and
approved
for
regional offices and other
implementation by DILG
concerned NGAs
management
Recommendations on the Functional
and Recommended
basic Full integration is affected
LGPMS
and
LGFPMS operational
operational integration for by
different
system
system linkages for data integration of the the 2 systems
requirements and data
sharing
LGPMS
and
entry timetables
LGFPMS
Recommendations on the Improved system
LGPMS
now The new LGPMS version
improvement of LGPMS infrastructure
accessible to users is now accessible as an
system
design
and support and easier
as
internet-based on-line internet based
accessibility
access
to
the
database system
database.
LGPMS database
Improved hardware
and
system The systems changes
bandwidth allocation
includes a revised data
Enhance system user entry timeline which is

requirements
now pegged between
definition,
systems September/
October
application
design, period to give LGUs realsecurity and technical time
data
of
their
architecture
to assessment and thus
address
scalability, should be linked to LGU
performance
& budget period
availability
V.
Recommendations for Next Steps.

A.
Component A
52.
The table below present the recommendations of Component A for succeeding
technical assistance.
Table 8: Component A Next Steps: Activities and Expected Outputs
Activities
Main Task 1: Provide Technical Support for
the interim CCD and the interim-CCD and
CCD Agenda:
B.
i.
Expected Outputs
Finalization of CCD Medium-Term Roadmap
consolidating policy concerns from other
stakeholders for presentation to next
administration.
ii.
Finalization of CCD short-term policy agenda.
iii.
Provision of policy advise on CCD policy

matters.
iv.
CCD Meetings.
Component B
53.
The table below present the recommendations of Component B for succeeding
technical assistance in the areas of local capacity building.
Page | 30

Final Report
May 2010
Table 9: Component B Next Steps: Activities and Expected Outputs

Activities
Expected Outputs
1.
Enhanced Guide to CDP Preparation
2.
Harmonization
Guidelines
3.
of
CLUP
and
CDP
Mainstreaming
of
Sectoral/
CrossSectoral/Thematic Concerns in the CDP and
CLUP
a)
Style editing to make it more user-friendly.
a)
Formulation of Implementing Rules and

Regulations of JMC No. 001 series of 2009
b)
Development and printing of Supplemental

Guide to CLUP Preparation leading to the
production of a Code-compliant CLUP
prepared within the framework of the RPS
and JMC No. 001 series of 2007.
c)
Development of training modules, session

guides and conduct of training program on
the preparation of Code-compliant CLUP
using the Supplemental Guide on CLUP
Preparation.
d)
Development of CLUP Review Guidelines,

to be used by the Provincial Land Use
Committee (PLUC), that will ensure
harmonization and vertical integration of the
CLUP with the Provincial Development and
Physical Framework Plan (PDPFP).
e)
Development and printing of Manuals for the

preparation of a Provincial Comprehensive
Land Use Plan and a Provincial
Development Plan as alternative guidebook
for formulating two separate plans as
mandated by the Local Government Code.
Technical assistance to National Government

Agencies
and
LGUs
in
developing
guidebooks/manuals
for
mainstreaming
sectoral/cross-sectoral/ thematic concerns in the
CLUP and CDP.
Continuous dialogue with DBM re: adoption of
common definition of terms used in investment
programming
4.
C.
Manual on Local Planning Database
Manual Project End May 2010.
Component C:
54.
The fundamental steps for maximizing the LGPMS results in LGU management
functions such as in planning, budgeting and policy development are put in place in this TA
through the LGPMS Utilization Manual. The manual needs to be integrated into the other
LGPMS manuals and disseminated and popularized accordingly with the intended users.
The core DILG staff at the regional and provincial levels should start testing/using the
manual particularly its links to budgeting and capacity development planning. The link of the
LGPMS in development planning can also be put test after next years elections. Training
and coaching modules should be developed for this purpose.
55.
With regards to the systems performance, this needs to be fully tested especially
prior to the conduct of the next round of planning cycle after the 2010 elections. The current
Page | 31

Final Report
May 2010
data entry should be technically assessed to prepare the system for a wider and intensive
use in 2010.
56.
The table below outlines some of the key activities that need to be completed to
ensure a wider acceptance and utilization of the LGPMS by LGU users.
Table 10: Component C Next Steps: Activities and Expected Outputs
Activities
Expected Outputs
Integration of the LGPMS Utilization Manual with Wider utilization of the LGPMS manual
the LGPMS User Manual
Dissemination and training
DILG expertise in facilitating the use of LGPMS
To further strengthen capacity, improve system
Improvement of the LGPMS System Design
performance, and operations of the system, the
following activities are necessary as follows:
Assessment of system usage by users
Development of a data management plan
Formulation of a system security plan
Development of disaster and recovery plan
Finalization of the LGPMS operational plan
VI.
Summary of Resources Used:

Table 11: Summary of Level of Effort (LOE) Usage (as of May 14, 2010)
Name
Raymund Fabre
Team Leader/ Decentralization Policy and Change
Mgmt Specialist
Ma. Cecilia Soriano

Institutional/Organizational Development Sp.
Sofronio Ursal
Legal Specialist
Jose Antonio League

LGU Investment Programming Specialist
Ernesto Serrote
Local Development Specialist
Liza-Marie P. Elum
LGU Capacity Development Specialist
Erlito Pardo
LGU Budget,Revenue Mobilization, Cost Accounting
Specialist
Rizalino Barandino
LGU Performance Management Specialist
Jay Lowell Payuyo

System Analyst
TOTAL
LOE
18
EXPENDED
18
%USED
100%
100%
0.4091
0.4091
100%
100%
100%
10
10
100%
0.3636
0.3636
100%
100%
100%
61.7727
61.7727
100%
Page | 32

Final Report
May 2010
Table 12: Summary of Equipment and Workshop Resources Used (As of May 14, 2010)
Progress Payment
AMOUNT
BILLED
BALANCE
1200 Equipment
1300 Seminars, Conferences
Add: VO1
22,000.00
15,492.16
6,507.84
205,000.00
21,400.00
226,400.00
197,877.68
28,522.32
Page | 33
ADB TA 7019: PHI - LOCAL GOVERNMENT FINANCING AND BUDGET REFORM (LGFBR) PROJECT
FIRST EXIT WORKSHOP
Mandarin Oriental Suites, Gateway, Cubao, Quezon City

January 8, 2010
Accomplishments:
19May2008to30April2010
Contents
1.
Objectives
2. Deliverables:TargetedandActual
3. Assessments
4. NextStepstoProjectEnd
ComponentAAccomplishmentsof11
FIRST EXIT WORKSHOP

January 8, 2010
Objectives
1.
Task1:ProvideTechnicalSupportfortheinterimCCD
andtheinterimCCDandCCDAgenda
2.
Task2:FacilitatethecreationoftheCoordination
CommitteeonDecentralization(CCD)
3.
Task3:FacilitatethecreationofaCCDTechnical
Secretariat
Deliverables
Targeted
Actual
MainTask1:ProvideTechnicalSupportfortheinterimCCDandtheinterim
CCDandCCDAgenda:
1. Draft first year (1-year) CCD interim agenda for 1.1 Draft first year agenda for Interim CCD.
approval of DILG and interim CCD.
2. Draft medium-term agenda (5-years) for CCD.
2. LGU Medium-Term Agenda, 2010-2015.
3. Workshop/consultation with CCD members on 3. First consultation conducted in October 2009.

medium-term agenda
4. Finalized medium-term agenda for CCD.
Ongoing.
5. Technical/Policy/Advocacy Advisory
(TPAAR): Harmonization of JMC 2007-1
Reports 5.1 Policy note and Draft Joint Memorandum Circular

for DILG and DBM on the Implementation of
Section 287 of Local Government Code of 1991.
5.2 Status Report on JMC Roll-Out (Presentation for
CCD Executive Committee).
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
CCDandCCDAgenda:
6.
Advisory
Reports
(TPAAR):
Harmonization of Land Use Planning LGU-NG Co-Management
Issues
7. Technical/Policy/Advocacy Advisory Reports (TPAAR): Tax
Amendments to the Local Government Code
No longer taken up.
1.
2.
3.
4.
8. Technical/Policy/Advocacy Advisory Reports (TPAAR): Review of

improvements in the release of intergovernmental transfers IRA,
special shares, VAT
1.
2.
3.
4.
5.
Revised Draft Bill Amending Tax Provisions of the Local

Government Code of 1991 House Version.
Revised Draft Bill Amending Tax Provisions of the Local
Government Code of 1991 Senate Version.
Highlights of the Proposed Local Tax Amendments to the
Local Government Code of 1991 (PowerPoint
Presentation).
Advocacy Plan for Book II Amendments.
Technical Report No. 3: Initial Comments on JICA-funded

Study on the Improvement of the Internal Revenue
Allotment (IRA) System in the Philippines.
Briefing Material on IRA Study (for Legislature).
Legal Comments on the Study on the Improvement of the
Internal Revenue Allotment (IRA) System in the
Philippines.
Comments on IRA Study Additional Work.
Reformulating the Internal Revenue Allotment: Prospects
for Cities (Presentation for the League of Cities of the
Philippines by DILG Undersecretary Austere Panadero).
Deliverables
Targeted
Actual
CCDandCCDAgenda:
9. Technical/Policy/Advocacy Advisory Reports (TPAAR):
Implementation of further devolution without legislative action in
the Department of Agriculture, Department of Environment and
Natural Resources, Department of Health, and Department of
Social Welfare and Development as recommended by the LGU
Leagues.
1.
2.
3.
First Policy Memo on Further Devolution in Selected

National Government Agencies: Initial Observations
and Next Steps.
Position Papers for Further Devolution of Service
Delivery: Selected Agencies under Executive Order
444 (Presentation for Working Group on
Decentralization
and
Local
Government,
Government Side (NG and LGU))
Draft Policy Position paper on Further Devolution in
Agriculture, Environment and Natural Resources,
Health and Social Welfare and Development.
10. Technical/Policy/Advocacy Advisory Reports (TPAAR): Ongoing. Awaiting final outputs of ADB TA 4778,
Review of non-tax, fiscal amendments to the Local Government
Code of 1991 IRA formula, share of LGUs in national wealth,
basis of IRA computation, LGU depository accounts in private
banks, share of LGUs in road users fund, etc.
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
CCDandCCDAgenda:
11. Technical/Policy/Advocacy Advisory Reports (TPAAR): Ongoing.
Review of further devolution without legislative action in other
key national government agencies such as the Department of
Public Works and Highways,
12. Technical/Policy/Advocacy Advisory Reports (TPAAR):
Federalism by the year 2012.
12.1 Terms of Reference on Economic Impact of Federalism.

12.2 Technical Paper No. 1: Local Tax Reform Initiatives and
the Drive towards Federalism in the Philippines.
13. Technical/Policy/Advocacy Advisory Reports (TPAAR): Ongoing. Awaiting final outputs of ADB TA 4778,
Review of the non-fiscal amendments to the Local Government
Code of 1991.
14. Draft Memorandum of Agreement between LGU Leagues Ongoing.
and Department of Agriculture, Department of Environment and
Natural Resources, Department of Health, and Department of
Social Welfare and Development on further devolution of
functions to LGUs.
Deliverables
Targeted
Actual
CCDandCCDAgenda:
15. Technical/Policy/Advocacy Advisory Reports 1. First Policy Memo on Devolution and Local
(TPAAR): Issues recommended by CCD Number of GovernmentTrustFund.
policyoutputsexceededbyatleast2.4tines.
2. Second Policy Memo on Devolution and Local
GovernmentTrustFund.
3.LocalServiceDeliveryStudyTermsofReference.
4. Policy Memorandum on House and Senate Bills on
SpecialEducationFundandtheAmusementTax.
5. Comments on House Committee on Local
Government Substitute Bill for House Bills Nos. 389,
742, 1250, 2183, 2625, 3505, and 4367 Amending the
Amusement Tax Provision in the Local Government
Codeof1991.
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
CCDandCCDAgenda:
(TPAAR):IssuesrecommendedbyCCD
Reports 6. Comments on House Bill No. 2452 and Senate Bill

No,1645 theValuationReformAct(VRA)andHouse
Bill3514 theRealEstateServiceAct.
7. Technical Paper No. 2: Towards A Cost Effective
System
for
Effecting
Real Property Valuation Reforms in the
Philippines.
8. A Technical Note on the Local Governance
Performance Management System (LGPMS) and the
CommunityBasedMonitoringSystem(CBMS).
9.RemainingIssuesonLGPMSCBMSTechnicalNote.
10. Stakeholder Coordination in Activities Supporting
Decentralization and Local Governance in the
Philippines:InitialThoughts
Deliverables
Targeted
Actual
CCDandCCDAgenda:
Reports 11. Stakeholder Coordination in Activities Supporting

Decentralization and Local Governance in the
Philippines: Initial Thoughts on Status and Issues
(PowerPointPresentation).
12. Comments on ADB PHCO LGU TAs for 2009 and
2010Pipeline.
13.TechnicalPaperNo.1(RevisedforLegislatureUse):
The Need for Local Government Finance Reforms in
theFaceofCharterChangeInitiatives.
14. LGU Credit and Financing Issues and
Recommendations (Revised for CCD Executive
Committee)
15. Overview of Accomplishments on Local
Government and Emerging Work Activities for 2009
2010 Onwards (Working Group on Decentralization
and Local Government, Government Side
PresentationforCCDExecutiveCommittee).
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
CCDandCCDAgenda:
Reports 16.MobilizationofODASupport(PresentationforCCD
ExecutiveCommittee).
17. Decentralization Experience of the Philippines:
ChallengesandImplicationsonLocalGovernment
Finance(WorkingGrouponDecentralizationand
Local Government, Government Side
PresentationforCCDExecutiveCommittee).
18. Policy Memorandum 10 March 2009: Comments

onDisasterRiskManagement(DRM)ProgramMemo.
19.LGFBRIssuePaperNo.1 Towards Enhancing the
Ability of LGUs to Generate Revenues from Business
Taxes.
20.InitialFutureLGFBRRecommendedPolicyReforms
Deliverables
Targeted
Actual
MainTask1:ProvideTechnicalSupportfortheinterimCCDandtheinterimCCD
andCCDAgenda:
Reports 21.InitialLGFBRSubprogram3PolicyInputs
22.PolicyMemorandum June1,2009:Commentson
NEDALetteronImpositionoftheIdleLandTax.
23.PolicyMemorandum August12,2009:Comments
onOverseasFarmInvestments.
24. Proposed 20092010 Work Plan Final Version
(September3,2009).
16. CCD Meetings and Workshops
12 conducted. Ongoing.
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
Main Task 2 Facilitate the creation of the Coordination Committee on
Decentralization (CCD):
1. Draft concept paper for expanding the agenda of the
MOUs Executive Committee.
2. Draft implementing guidelines for JMC 2007-1 and
MOU, if necessary
3. Discussion paper on modalities for CCD structure.
1. Policy Memorandum on JMC 2007-1 Executive

Committee as Interim CCD.
2. Review of DILG-DBM-DOF-NEDA JMC 2007-1
MOU.
3. CCD Briefing Material.
4. Workshop on modalities for CCD structure including 4. CCD Meetings.

relationship with other coordinating committees and
first year agenda.
5. Draft organizational structure for CCD with technical 5. CCD Final Memorandum of Understanding.
secretariat based on chosen modality.
Deliverables
Targeted
Actual
Main Task 2 Facilitate the creation of the Coordination Committee on
Decentralization (CCD):
6. Draft operational guidelines for CCD.
CCD Final Memorandum of Understanding signed

November 2009.
7. Terms of reference for technical secretariat
November 2009.
8. Workshop/consultation with CCD members on draft CCD Meeting.
operational guidelines.
9. Finalized operational guidelines.
November 2009.
10. Draft executive issuance for creation of CCD.
November 2009.
FIRST EXIT WORKSHOP

January 8, 2010
Deliverables
Targeted
Actual
MainTask3 FacilitatethecreationofaCCDTechnicalSecretariat:
1. Draft Manual of Operations and Continuing Ongoing. Completion in March 2010.
Research Agenda for CCD Secretariat
2. Orientation Workshop for CCD Secretariat
Ongoing. Completion in March 2010.
3. Finalized draft manual of operations and Ongoing. Completion in March 2010.

continuing research agenda for CCD secretariat
Assessment
ExpectedOutcome
ActualOutcome
Assessment
andCCDAgenda:
Legislation passed on the Executive and
LGU League-endorsed tax amendments
to the Local Government Code of 1991.
Draft consensus Congressional and

Senate bill was completed with support
from oversight agencies and LGU
Leagues. In addition, draft bill was
submitted with endorsements from the
Secretary of the DILG, the Leagues of
Provinces, and the League of Cities.
However, House Committee on Local
Government declined on filing the bill
due to the claim that this would not be
supported by congressmen due to the
number of measures. Bills are currently
still endorsed by the CCD and will
passed on to the next Administration and
Congress.
In spite of overwhelming support from the

oversight agencies and the LGU Leagues,
the draft legislation failed to pass due to
inaction from the legislature. Although the
legislature was consulted in various
stages of the bill drafting, support for the
filing of the bill was not explicit. Although
one claim was that congressman felt that
the bill had too many amendments, these
were mostly of the same nature (e.g.,
increases in existing local tax rates).
There was an unanticipated dynamic
between the LGUs and the legislature
which the project could not identify and
could only be attributed to conflicting
interests among the parties. It could also
be the case that the measure did not
provide any incentive for the legislature to
work on. On the other hand, the bill
remains in the agenda of the CCD which
may find a better chance of passing with a
new set of legislators.
FIRST EXIT WORKSHOP

January 8, 2010
Assessment
ExpectedOutcome
ActualOutcome
Assessment
andCCDAgenda:
Signed Memorandum of
Agreements between LGU
Leagues and the Department of
Agriculture, Department of
Environment and Natural
Resources, Department of Social
Welfare and Development, and
Department of Health on further
devolution of functions to LGUs.
As of the mid-term report it was

recommended by the DILG that the
objective was to draft position
papers for further devolution in
selected sectoral agencies which
would be endorsed by the LGU
Leagues to the next administration.
Drafts have been completed for the
review of the LGU Leagues and
finalization in 2010.
The probability of attaining MOA

between the LGUs and the selected
sectoral agencies weakened when
resources for the re-engineering of
the bureaucracy became scarce.
Furthermore, policy environments in
agencies such as the Department of
Agriculture undertook a reversal
when senior management moved
toward recentralizing functions. The
position papers will be more useful
when a new administration is in
place and more open to further
decentralization.
Assessment
ExpectedOutcome
ActualOutcome
Assessment
andCCDAgenda:
1.
Approved
medium-term Draft completed on LGU Medium- Draft will be finalized after additional
agenda for CCD.
Term Roadmap, 2010-2015.
inputs are included from the CCD
members.
FIRST EXIT WORKSHOP

January 8, 2010
Assessment
ExpectedOutcome
ActualOutcome
Assessment
MainTask2 FacilitatethecreationoftheCoordinationCommitteeon
Decentralization(CCD)
1. Fully-functioning
Coordinating Committee
on Devolution (CCD) that
meets every month and
institutionalized through
an executive issuance.
CCD
institutionalized
through
Memorandum of Understanding
between oversight agencies and
LGU Leagues.
The approach of having the

members get used to working on
policy issues together before
formalizing the body was very
effective in building consensus even
among resistant members. However,
continuous technical assistance on
policy issues from donors is needed
to support the body.
Assessment
ExpectedOutcome
ActualOutcome
Assessment
MainTask3 FacilitatethecreationofaCCDTechnicalSecretariat
1. Fully-functioning
CCD CCD technical secretariat legally The technical secretariat will most
created in CCD MOU. Capacity effective as agenda and technical
building to be provided in 2010.
assistance managers given the
limited number of personnel that can
be provided within the bureaucracy.
Given this, continuous technical
assistance on policy issues from
donors is needed to support the
technical secretariat and the CCD.
FIRST EXIT WORKSHOP

January 8, 2010
ProjectEndFinalActivities
Activities
Deliverables
Main Task 1: Provide Technical Support for the 1.

interim CCD and the interim-CCD and CCD
Agenda:
2.
3.
4.
5.
6.
Main Task 3 - Facilitate the creation of a CCD 1.
Technical Secretariat
2.
3.
Consultation, reformulation and finalization of

CCD Medium-Term Roadmap consolidating policy
concerns from ADB TA 4556, ADB TA 4778 and
LGFBR-2.
Drafting of policy paper consolidating policy issues
on decentralization from recent ADB and other
donor studies.
Legal study on Decentralization Study
Recommendations.
Publication of ADB TA 4778 Studies.
Consultation and finalization of CCD short-term
policy agenda.
CCD Meetings.
Draft Operations Guidelines and Continuing
Research Agenda for CCD Secretariat.
Orientation Workshop for CCD Secretariat
Finalized operations guidelines and continuing
research agenda for CCD secretariat
RaymundC.Fabre
TeamLeader
ADBTA7019
OperatingProtocols
PROTOCOLS GENERAL
1.
2.
3.
TheCCDExecutiveCommittee(CCDExecom)will
meeteverysemesterortwiceayear.ACCD
ExecutiveCommitteemeetingmaybecalledbythe
DILGUndersecretaryupontherecommendationof
theCCDPolicyDialogueGroupshouldapolicy
issueneedtobedecideduponbytheCCDExecom.
TheCCDPolicyDialogueGroup(CCDPDG)and
LGUDialoguePartnerswillmeeteveryquarteror4
timesayear.Specialmeetingsmayalsobe
organizedastheneedarises.
TheCCDTechnicalSecretariat(CCDTC)will
preparetheagendaforeachmeetingbasedonthe
recommendationsoftheCCDExecom orCCDPDG
andLGUDialoguePartners.
PROTOCOLSGENERAL
4. TheCCDTCwillberesponsiblefor
documentingtheminutesofthemeeting
includingissues,commentsandagreements
andprepareanybriefingdocumentsandinvite
anyresourcepersonsneededbytheCCD.
5. Thetechnicalsecretariatwillberesponsiblefor
providingthelogisticalsupportforallCCD
meetings.
6. TheCCDExecomwillonlybeconsideredin
quorumifalltheUndersecretariesrepresenting
theCCDECarepresent.
PROTOCOLS GENERAL
FortheCCDInorderfortheretobeaquorum,
theremustbeatleastfour(4)othermembers,
excludingtheDILG,oftheCCDpresentatany
meetingwithatleastone(1)membercoming
fromthenationalgovernmentexceptforthe
DILGandatleastone(1)memberfromtheLGU
Leagues.
8. TheDILGUndersecretaryortheBLGDDirector,
ashisdesignate,mustbepresenttochairthe
CCDPDGmeeting.
7.
PROTOCOLS GENERAL
9. Theminutesofthepreviousmeetingwillbe
reviewedandapprovedaswellasbusinessfrom
thepreviousmeetingdiscussedbeforeanynew
agendawillbetakenup.
10. Theminuteswillbeconsideredapprovedwitha
movefromanymemberoftheCCDcallingfor
theapprovalandanothermemberseconding
theapproval.
PROTOCOLS GENERAL
11. Policyissueswillbeassignedtotherelevant
agencyoragenciesorLGULeague(e.g.,revenue
generation BLGF)forthepurposeofpreparing
thepolicyagendaandbriefingdocuments.
12. EachagencyandLGULeaguewilldesignateone
(1)pointpersonandone(1)alternativefor
followupsonagendaissuesandbriefing
documentsbytheCCDTechnicalSecretariat.
13. EachagencyandLGULeaguewillbeassigned
one(1)pointpersonwithintheCCDTechnical
Secretariat.
PURPOSEOFAGENDA
1.
2.
3.
4.
InformationSharing
FollowupofPreviousBusiness
CoordinationMatters(Policy,Operational,Project,
andTechnicalAssistance)
DecisionMaking
FUNCTIONSOFTHETECHNICAL
SECRETARIAT
TECHNICAL
ADMINISTRATIVE
TECHNICAL
Supporttomeetings
a. Preparationoftheminutes
b. Agendasetting
c. Preparationoftechnicaldocumentsfortheagenda
folder
2. ImplementationofthedecisionsoftheCCD
a. Monitoring/trackingofagreementsduringmeetings
b. CoordinationandmonitoringofCCDWorkplan
1.
ADMINISTRATIVE
1. LogisticalSupport
2. Wordprocessing,filingand
telephone/faxservices
3. Preparation(compilationand
packaging)ofagendafolders
COORDINATING COMMITTEE ON DECENTRALIZATION (CCD)

Operating Guidelines
A.
B.
Definitions:
1.
The Coordinating Committee on Decentralization (CCD) shall be composed of an

Executive Committee (Execom) and a Policy Dialogue Group (PDG) to facilitate
the implementation of decentralization under the Local Government Code of
1991, enhance local autonomy, and promote further devolution.
2.
The Executive Committee shall be composed of the Secretaries of the Oversight

Agencies (OAs) or their representatives to be chaired by the DILG. The
Oversight Agencies are the Department of the Interior and Local Government,
the Department of Finance, the Department of Budget and Management, and the
National Economic and Development Authority. Serve as an approving authority
on recommendations from the Policy Dialogue Group (PDG); and provide
advisory function in connection with the activities of the CCD.
3.
The Policy Dialogue Group shall be composed of the Oversight Agency

Technical Group and the Local Government Dialogue Partners chaired by the
Undersecretary for Local Government of the DILG. The Policy Dialogue Group
shall support the Executive Committee by acting as a review and
recommendation panel for matters that shall be elevated to the Executive
Committee for appropriate action.
4.
The Oversight Agency Technical Working Group shall be composed of the

Director of the Bureau of Local Government Development (BLGD) of the DILG,
the Executive Director of the Bureau of Local Government Finance (BLGF), the
Director of the Budget and Management Bureau G (Bureau G) of the DBM, and
the Director of the Regional Development Coordination Staff (RDCS) of the
NEDA.
5.
The Local Government Dialogue Partners shall be composed of Executive

Director of the League of Provinces of the Philippines (LPP), the Executive
Director of the League of Cities of the Philippines (LCP), the Executive Director
of the League of Municipalities of the Philippines (LMP), the Executive Director of
the Liga ng mga Barangay (LnB), and the Executive Director of the Union of
Local Authorities of the Philippines (ULAP).
Functions of the CCD:

6.
Act as an inter-governmental body for coordinating and harmonizing policies and

operational activities related to decentralization and devolution;
7.
Provide a forum for discussing LGU issues and policies and for sharing relevant
information;
8.
Collectively formulate, implement and advocate solutions and policy reforms

within the powers and authorities of its member agencies;
C.
D.
9.
Explore consensus and build support for policy reforms related to improving local
governance, local service delivery, and devolution;
10.
Elevate issues and recommendations to the Oversight Committee on Devolution

(OCD) and other appropriate agencies, bodies and boards for policy decision and
action; and
11.
Initiate studies on LGU issues for the purpose of identifying, formulating,

implementing and advocating policy reforms.
Scope of the CCD Agenda:

12.
Capacity-Building;
13.
Credit and Non-Traditional Local Government Finance;
14.
Local Government Fiscal Matters and Policy including but not limited to Donor
Financing, Intergovernmental Fiscal Relations; and Own-Source Revenue
Generation;
15.
Budget and Expenditure Policy;
16.
Local Planning;
17.
Local Service Delivery;
18.
Performance Measurement; and
19.
Devolution Reforms.
CCD Meetings and Quorum

20.
The CCD Executive Committee (CCD Execom) will meet every semester or twice
a year. A CCD Executive Committee meeting may be called by the DILG
Undersecretary upon the recommendation of the CCD Policy Dialogue Group
should a policy issue need to be decided upon by the CCD Execom.
21.
The CCD Execom will only be considered in quorum if all the Undersecretaries or
their duly designated representatives are present.
22.
The CCD Policy Dialogue Group (CCD PDG) and LGU Dialogue Partners will
meet quarterly every 2nd week of the 2nd month of each quarter. Special meetings
may also be organized as the need arises.
23.
In order to declare a quorum during meetings, all 4 members of Policy Dialogue

Group must be present and at least two (2) members from the LGU Leagues.
24.
The DILG Undersecretary or the designated co-chair for the year must be
present to chair the CCD meeting. The co-chairmanship shall revolve among the
other CCD oversight agencies.
E.
25.
Other policy dialogue partners may be invited during CCD meetings as resource
person, but invited resource persons shall have no voting power.
26.
All CCD members shall take turns hosting the CCD meetings.
27.
The minutes of the previous meeting will be reviewed and approved as well as
business from the previous meeting discussed before any new agenda will be
taken up.
28.
The minutes will be considered approved with a move from any member of the
CCD calling for the approval and another member seconding the approval.
Policy Agenda Items for Discussion during CCD Meeting

29.
The agenda items and prioritization of items for the meeting will be agreed upon
by the CCD members at the close of the previous meeting.
30.
Additional agenda items shall be submitted to the CCD Technical Secretariat

three (3) weeks before the CCD meeting for inclusion in the final agenda.
31.
The CCD Technical Secretariat will circulate the final agenda items to all CCD
members two (2) weeks before the CCD meeting for comment. The CCD
meeting agenda will be considered final one (1) week before the CCD meeting.
Absence of a response from any CCD member to the agenda one (1) week
before the CCD meeting will be considered as acceptance of the circulated
agenda.
32.
Policy issues will be assigned to the relevant agency or LGU League (e.g.,
revenue generation BLGF). The proponent agency will provide the technical
inputs, supporting documents and recommendations for resource persons to the
CCD Technical Secretariat for the CCD meeting.
33.
Each agency and LGU League will designate one (1) point person and one (1)
alternate for follow-ups on agenda issues and briefing documents by the CCD
34.
Each agency and LGU League will be assigned one (1) point person within the
CCD Technical Secretariat.
35.
Proponent agencies for policy agenda items shall submit technical inputs to the
CCD Technical Secretariat no later than three (3) weeks from the CCD meeting
for the preparation of the agenda items policy brief. Proponent agencies shall
also submit supporting documents and relevant studies to the CCD Technical
Secretariat at least two (2) weeks before the CCD meeting. Proponent agencies
shall also submit to the CCD Technical Secretariat the names and contact
information of resource persons and agencies needed for the CCD meeting at
least three (3) weeks before the CCD meeting.
36.
Any CCD member may make a motion to place a policy recommendation to a

vote. All CCD members present in the meeting have to agree unanimously to
place a policy recommendation to a vote. A simple majority is needed to

determine the acceptance or rejection of the policy recommendation.
F.
Duties and Functions of CCD Technical Secretariat

C.1
Technical:
37.
Support to meetings
a)
b)
c)
38.
Implementation of the decisions of the CCD

a)
b)
G.
Preparation of the minutes

Agenda preparation
Preparation of technical documents such as policy briefs and supporting
documents for the agenda folder
Monitoring/tracking of agreements during meetings

Coordination and monitoring of CCD Workplan
C.2
Administrative:
39.
Logistical Support
40.
Word processing, filing and telephone/fax services
41.
Preparation (compilation and packaging) of agenda folders
CCD Protocols for the Convening of the Oversight Committee on Devolution

42.
The CCD shall elevate any policy recommendations on decentralization issues

which require higher authority decision/approval/action to the Oversight
Committee on Devolution (OCD).
43.
Any member agency or agencies of the CCD may raise the issue to the CCD
during a regular or special meeting for recommendation to the OCD.
44.
The member agency or agencies of the CCD that raised the issue and/or is
directly involved by virtue of its mandate will be responsible for furnishing the
CCD Technical Secretariat with technical inputs and supporting documents to
accompany the CCD recommendation to the OCD.
45.
The CCD resolution shall be forwarded to the OCD in a letter to be signed by the
CCD Chair.
46.
The CCD Technical Secretariat will be responsible for submitting the

recommendation to the Office of the President and to follow up on an approved
date for the convening of the OCD.
47.
The CCD will coordinate closely with the OCD on documentation requirements
and resource persons/agencies for the meeting and action taken by the OCD.
HIGHLIGHTSOFTHE
3 COORDINATINGCOMMITTEEONDECENTRALIZATION(CCD)MEETING
March30,2010,9:30am
AstoriaPlaza,EscrivaDrive,PasigCity
rd
MembersPresent :
1) USEC.AusterePanadero
DILG
2) JoseArnoldTan
BLGF
(representingExe.DirPresentacionMontessa)
3) JunMoises
DBMBMBG
(representingDir.CarmencitaDelantar)
4) FaisalAbdul
NEDARDCS
(representingDir.SusanRachelJose)
5) Atty.MoninaCamacho
ULAP
6) HildaCorpuz
LCP
7) RommelMartinez
LMP
LPP
8) RobertLimbago
Member/sAbsent
LnB
OthersPresent
9) ASECRolandoAcosta
DILG
10) PriscellaMejillano
DILGBLGD
11) Ma.PamelaQuizon
BLGFDOF
12) ReaAnnS.Rojo
BLGS
13) MariaConsolacionS.Buena
BLGS
14) RaymundFabre
ADBConsultant
15) JojoFlores
ADBStaff
TechnicalSecretariat
16) Asst.DirectorAnnaLizaBonagua
DILGBLGD
17) BLGDPolicyTeam
CCDSecretariat
I.
CALLTOORDERANDQUORUM
There being a quorum, the meeting was called to order at 9:30 am by DILG
UndersecretaryandCCDChairAustereA.Panadero.

APPROVALOFTHEPREVIOUSMINUTESOFTHEMEETING
Therebeingnoothercommentsormatterforcorrection,thehighlightsoftheprevious
meetingwasapproved/adopted.
III.
MATTERSARISINGFROMTHEPREVIOUSMINUTESOFTHEMEETING
UsecPanaderopresentedthemattersarisingfromtheminutesofthepreviousmeeting
lastJanuary8,2010atGatewaySuites,QuezonCity.
STATUS
AGREEMENTS
UpdatesonComputerizationforLGUs
Ms. Pam Quizon of DOF update the group that the BLGF shall convene the meeting on
LGUGuidelinesonComputerizationwasprintedout June4,2010attheHeritageHotel.
and ready for distribution to LGUs and partner
agencies.SaidguidelineswillhelpLGUsassesswhat Details shall be provided by BLGF
softwareand/orserviceprovidertoadopt.
DOFduringthenextCCDmeeting.
CCD Secretariat was tasked to convene a meeting

with DOF, CICT, and LGU Leagues regarding the
computerization of financial systems of LGUs. BLGF
was tasked to lead the forum, prepare the agenda
andpolicyquestionstoresolve.
II.
IV.
HIGHLIGHTSOFTHEPREVIOUSMEETING
Issue(s)/
Discussion
Area(s)ofConcern
ValidationofLand
ASECRolandoAcostapresented
AreaSurveyOf2007 thehighlightsofvalidationof
asBasisofIRA
landareameasurementsdoneby
Computation
thecommitteetovalidatethe
landareasurveycomposedof
DILGBLGS,MANRIAandLMB.
Basedonthepresentation,the
committee,afterinitial
evaluationproposedthe
followingrecommendations:
1. Landareainformationof
Agreements/
Recommendations
Itwasagreedforthecommittee
onlandareasurveyvalidationto
finetunerecommendationsfor
submissiontotheOfficeofthe
Presidenttakinginto
considerationthefollowing:
1. Tocontinueusing2001land
areasurvey.
2. RegionARMMtocomeup
withestimateforthe
computationandaslongas
2001mighthavetobeused
wearenottoexceedtothe
forthenext5yearsand
totallandareaofmother
thereseemstobenologicin
LGUs.
validating2007landdata
3. NewlycreatedLGUsshould
2. UsingtheNAMRIAbasemap
knowthemaximumareaand
of30Mhas.,LMBtoproject
divideitusingestimateby
landareasofprovinces,
LMB.
citiesandmunicipalities,
4. LMBtocontinueCadastral
insteadofresortingtonever
SurveyusingtheNAMRIA
basemapof30Mhas.
endingestimations
3. Completionofprojection
usingNAMRIAbasemaps
mighttake5yearandsome
dedicatedinvestmentson
thepartofthenational
government.
However,2001landsurveydoes
notincludeinfoonnewlycreated
LGUs.DBMcomputesfortheirIRA
basedonofficiallanddata.
Memorandum
CircularEncouraging
Cities&
Municipalitiesto
ImposeIdleLandTax
AssistantDirectorAnnaBonagua
discussedthefollowingNLUC
requestforDILGActions:
1. ProposeamendmenttoLGC
toprovidemunicipalitywitha
shareoftheidlelandtax.
2. Issuanceofmemorandum
circulartoLGUstocollectidle
landtax
Onitem#1,theLGULeagues
duringtheconsultationonthe
proposedamendmenttoLGC
madeanagreementtomaintain
astatusquoontheirsharingof
taxesincludingidlelandtax.
Onitem#2,DILGisseeking
recommendationofDOFBLGFon
thepossibilityofaDILGDOF
JointIssuanceforLGUstocollect
idlelandtax.
ItwasagreedthatDILGandDOF
shall issue a joint issuance to
encourage LGUs to be efficient
andeffectiveinthecollectionof
Idle Land Tax as well as remind
LGUstoimprovecollectionofall
otherlocaltaxesandfees.
On the issue raised regarding

the different interpretation of
DBM and DOF on the
computation of additional 1%
levy on Real Property for the
Special Education Fund (SEF), it
was agreed that DBM and DOF
harmonizetheirpolicies.
UpdatesonJMC
No.0012009:
Guidelinesonthe
Harmonizationof
CLUPandCDP
Preparation
UpdateonFMOC
DIALOGFundMeeting
Ms. Priscella Mejillano, DILG Issuesandupdatesonprograms

BLGD presented the updates on on Disaster management and
JMC No. 0012009 on CLUP and Climate Change Adaptation for
CDP harmonization, the need to LGUswassuggestedtobetabled
detailtheJMCandtheoutputon asagendaforthenextmeeting.
theWorkshopondetailingJMC.
JMC No. 12009 was primarily

intended to provide mechanisms
on the harmonization of steps
andprocessesinthepreparation
of CLUP and CDP and clarify and
establish points of convergence
and divergence for spatial and
multisectoralplanning.
Per information from Mr. Abdul

of NEDA, 70 out of 79 Provinces
haveCDCP.
TheresaneedtoconvinceLGUs
(starting from the 27 high risk
LGUs) to revisit their CLUP to
integrate disaster migitation and
climate
change
adaption
measures into their CLUPs
translated in their Zoning
Ordinance.
Concerns were raised whether

Zoning Ordinances and Building
Codes are enforced as well as
monitoring
of
buildings
constructed before the Building
Code?
Assistant Director Anna Liza F. A portion from the DIALOG Fund

Bonagua presented the updates can be used to fund proposals in
on the FMOC Meeting held last pursuing devolution. Hence, it was
suggested that Leagues submit
February9,2010,towit:
proposal after the reorganization
oftheirrespectivechapters.
FMOC adopted the Operating
guidelines on the DIALOG Trust
Fund
Inviewofthecomingelection,itis
FMOC collapsed the ten (10)
urgenttoprioritizedsupportto
proposed activities into seven (7)
namely:
NEOProgram.
1. CapacityBuildingonNEO
2. Capacity Building for the

utilization and Analysis of
theLGPMS
3. Improving on the Integrity
and Quality of LGU
StatisticalData
4. Institute
Reforms
to
Improve Local Economic
Enterprise
5. Definition of Policy and
Legal Framework on the
Extent of LGU Corporate
Powers
6. Review on Decentralization
related Laws Specially on
those
Affecting
Fiscal
Operations at LGUs and
Implement Measures to
Improve
Executive
LegislativeLiaison
7. Action
Plan
for
Decentralization
The project concept note
proposalonCapacityBuildingfor
NEO was submitted to World
Bank for refinement and
approval.
Threemoreconceptnoteswere
submitted
to
WB
for
consideration:
1. Review of consistency of
National Laws and Local
Regulations focusing on
Fiscal
Incentives/Tax
Exemptions being granted
byNG
2. Definition of Policy and
Legal Framework on the
Extent of LGU Corporate
Powers
3. Action Plan for Further
Decentralization
No concept notes had been
submitted on the remaining 2
otheractivities.
Proposed Roadmap for Mr. Raymund Fabre presented

Deepening
Medium Term LogFrame 2010
Decentralization
2016.Whichincluded:
Reforms
1. Short to Medium Term
Scenario
2. The 20112016 Log frame
with
showing
Impact
Outcome Outputs Inputs
andActivities
Mr. Martinez of LMP suggested to

use the MDGs as basis for the
targetingforLGURoadmap.
There were also suggestion to

include the following in LGU
Roadmap:
1. Enhancing Competency of
Treasurers
2. Review devolved function
the without corresponding
budget like DOH devolved
services. Determination of
costtodeliversuchservices
To ensure that local governance

policy reforms are included in the
priorityoftheadministrationitwas
suggested to explore the inclusion
ofachapteronLocalGovernancein
theMTPDP.
Per Information from Mr Abdul,

MPTDPwillbeupdatedinthethird
quarterofthisyear.
V. OTHERMATTERS
TheCommitteeagreedthattheCCDwouldconvenequarterly.Atentativescheduleof
CCDquarterlymeetingswaspresentedfortheguidanceofCCDmembers.
ScheduleofnextCCDmeetingswassetonApril26,2010.
VI. ADJOURNMENT
Themeetingadjournedat1:00intheafternoon.
PreparedbytheCCDTechnicalSecretariat
Attestedby:
AUSTEREA.PANADERO
DILGUndersecretaryandCCDChair
Efficient and Effective Mobilization and

Management of Resources by LGUs
In recent years, the incomes of LGUs have generally been declining. This has
mainly been the result of two declining trends: (a) that of the Internal Revenue
Allotments (IRA) which, in turn, are caused by the persistent decrease in the BIR tax
collection effort, as well as (b) that of the LGUs own revenue efforts. Consequently,
LGU spending has shrunk. The outstanding long-term debts of LGUs have also
almost doubled and some LGUs have resorted to the frequent restructuring of their
loans.
The fall in revenue has certainly limited the ability of LGUs to deliver the needed
services to the people. This has meant, among other effects, less and weaker
economic stimulation and therefore more unemployment and weaker livelihood,
poorer social services, and worse peace and order situation. The country's everincreasing population and recent economic difficulties brought about by the global
financial crisis have increased the pressure on LGUs to make up for the decline in
their revenues and then gain access and mobilize even more.
And, in the current play of things, where the responsibility of seeing to the economic,
social and political development of the country has shifted and is now partially the
LGUs', addressing the need for LGUs to access more resources to deliver the
required government services has taken on dramatically more significance to the
country's well-being.
Gaining access to more resources so that they can effectively fulfill their vital role in
the country's development requires that LGUs (a) internally generate more revenues,
(b) use current resources more efficiently, and (c) access and mobilize more external
resources. Among the more specific ways they can do so are the following:
1.
2.
3.
4.
5.
6.
I.
Improving public expenditure management, so that resources can be

allocated more efficiently, thus allowing them to do more with less;
Managing their personal services (PS) expenditures better, thus making
more efficient use of their largest budget allocation;
Operating local economic enterprises (LEEs) more efficiently, thus
reducing and even eliminating operating losses;
Using the Special Education Fund (SEF) more effectively, thereby making
the resources available to them for improving education in their
jurisdictions mean more;
Accessing more official development assistance (ODA); and
Mobilizing external resources through the exercise of their corporate
powers.
Improving Public Expenditure Management

Fiscal discipline helps improve the allocation of resources by allowing
LGUs to prioritize their activities based on a realistic appreciation of
how much resources they have to spend, and when..
A.
Principles of public expenditure management
Public expenditure management is based on three basic principles: (i) fiscal

discipline, (ii) allocative efficiency, and (iii) operational efficiency. Fiscal discipline
2
provides that the demand for government spending be matched with the available
resources. Allocative efficiency, meanwhile, asks that LGU spending be aligned with
policies and priorities by reallocating resources (i) from programs, projects and
activities (PPAs) that are of lower priority to those of higher priority, and (ii) from less
effective to more effective PPAs. Operational efficiency calls for delivering goods and
services in a manner that is efficient and economical.
Fiscal discipline helps improve the allocation of resources by allowing LGUs
to prioritize their activities based on a realistic appreciation of their budget
constraints. It creates an environment that encourages allocative and operational
efficiency, thus allowing LGUs to do more with less. Throughout the world, therefore,
fiscal rules require governments to balance their budgets or to subject certain fiscal
aggregates to very specific targets.
Local governments in the Philippines are likewise subject to some form of
balanced budget constraint, although this constraint is weaker than those in other
countries. Under this constraint, proposed and approved budget appropriations for
current operating expenditures must not exceed current revenues. The operating
fiscal balance or current fiscal balance is not allowed to be in deficit. The actual
results of budget execution must be balanced so that the total expenses is not more
than the sum of current revenues, cash at the end of the previous period, and
borrowings, provided borrowings are incurred for the sole purpose of financing capital
outlays.
B.
Current trends in LGU public expenditure management
The following characterize public expenditure management among LGUs in

the Philippines:
1.
Current and overall fiscal balances
LGUs as a whole had current fiscal surpluses in 2002-2007, these surpluses

being equal to 16% of total LGU income. Meanwhile, the overall fiscal balance of all
LGUs was equal to 0.4% of GDP or 10.9% of total LGU income. Both current and
overall fiscal balances declined during election years, and then recover the
succeeding years.
These surpluses are the result of the following factors:
a.
the cautious fiscal stance of many LGUs because they are not allowed
to incur deficits, thus making them very conservative in their income
estimates and/or very strict in their expenditure controls,
b.
the unused portion of their calamity fund which they are required to
keep intact until the end of the fiscal year unless a calamity/ disaster
does occur, and
c.
delays in the implementation of projects.
Because the surpluses are caused by these factors, experts argue that such
surpluses are illusory. They say that once LGUs actually realize a fiscal surplus at
the end of any given fiscal year, the LGUs immediately appropriate the full amount
that is available for appropriation by enacting a supplemental budget.
3
2.
Cash reserves
The growth in cash at the end of the period of all LGUs is consistent with the
movement in the overall balance. When expressed as a percentage of GDP or total
LGU income, cash reserves of all LGUs remained fairly stable at 1.2%-1.3% of GDP
and 33%-37% of total LGU income during the period.
3.
Debt financing of capital outlays
The capital outlays of all LGUs combined were fully financed by the net result
of operating activities in 2002-2003 and in 2005-2006. This trend is consistent with
the observed accumulation of fiscal surpluses by all LGUs during these years. In
2004 and 2007, however, capital outlays were financed partly by net borrowings. In
2007, capital outlays were also financed by a drawdown of accumulated surpluses.
These trends appears to support claims that elective LGU officials tend to
spend their surpluses in earlier years and then incur more debt during election years.
Some observers raise the concern that local chief executives tend to borrow more as
their terms are about to end at the expense of incoming officials who are left to pay
off such indebtedness. However, the trend in outstanding long-term liabilities of all
LGUs does not appear to strongly support these apprehensions.
4.
Cash inflows from new debt and cash outflows to redeem

existing debt
While the outstanding long-term debt of all LGUs did increase between 2002
and 2007, it did so only slightly. It went up from 0.14% to 0.17% of total LGU income
during the period despite the fact that the nominal level of outstanding long-term
liabilities of LGUs almost doubled.
There have been claims that a number of LGUs have incurred debt which
they cannot service without exceeding their debt cap. To cope with the problem,
these LGUs (with concurrence of the creditor banks) re-structure their debt. In 2007,
cash outflow for the amortization/retirement of old debt accounted for at least 50% of
the cash inflow from loan proceeds in 10% of provinces, 21% of cities and 5% of
municipalities. This finding provides some evidence that indeed the number of LGUs
which may be having problems servicing their debt are not as insignificant as one
would initially expect given the balanced budget rules in the Local Government Code.
C.
Measures that would improve LGU public expenditure management
Improving the LGUs public expenditure management requires that (a) the
resources available for allocation be measured appropriately, and that (b) the fiscal
position be managed properly.
1.
Properly measuring resources that are available for appropriation
Arriving at good estimates of the amount of resources available for

appropriation or operation at the end of previous year will contribute significantly to
the improvement of public expenditure management system. It will define better the
total amount of resources the LGU can allocate and use. This measure is perhaps
even more critical than properly measuring the current or overall fiscal balance, not
only in enforcing fiscal discipline but also in improving resource allocation and
operational efficiency as it promotes total resource budgeting.
4
Unfortunately, the amount of resources available for appropriation at the end
of the previous year cannot be read off easily from any of the existing financial
reports that LGUs are required to submit. Moreover, despite guidance in the UBOM
to the contrary, budget officers do not include an estimate of the amount of resources
available for appropriation at the end of the previous year when they prepare the
budget proposal for the incoming year. Instead, they only look at estimates of current
revenue/income vis--vis proposed spending.
The amount available for appropriation at the end of the year is equal to the
amount available for appropriation at beginning of the year plus revenues/income in
the current year less current and capital expenditures in the current year less
accounts payable less the value of continuing appropriation. During the period 20022007, this amount varied from 4% - 9% of total LGU income and was consistently
larger than the overall fiscal surplus during the period.
LGUs which have negative amount available for appropriation have
accounts payable that are significantly larger than their cash reserves. Moreover, if
the amount is negative, it is more likely that the LGU will post an overall fiscal deficit.
However, if the LGU has an overall fiscal surplus, then it is more likely that the
amount available for appropriation in the LGU is also positive.
2.
Managing the fiscal position
Properly managing the fiscal position requires having realistic income

estimates and implementing the required expenditure controls.
a.
Realistic income estimates
Good public expenditure management means that budget preparation starts

with a realistic estimate of the amount of resources that are going to be available.
Income estimates that are too pessimistic tend to result in the very conservative
formulation and implementation of the budget, thereby resulting in large budget
surpluses and the non-implementation of much needed programs. On the other
hand, overly optimistic income estimates lead to the sequestration of allotments,
delays in the obligation of expenditure authorization and, subsequently, delays in
project implementation. Furthermore, the appropriation does not necessarily reflect
actual fund utilization and the budget becomes non-transparent.
In practice, income/ revenue estimates on which the annual budget is based
tend to be poor. Many local treasurers do not appear to follow a systematic
approach in coming up with their income estimates.
There is a need to upgrade the technical capacity of LGUs in formulating
honest and realistic estimates of income and sources of budget finance, including the
amount available for appropriation at the end of each fiscal year. It should be
emphasized, however, that the problem does not only come from the lack of
technical capacity of LGU personnel but also from bureaucratic inertia and the desire
of politicians to keep an excessive number of programs during budget preparation.
This underscores the need for communicating the public expenditure management
framework at the local level.
b.
Expenditure controls
Once the budget is passed, the budget enters the budget execution phase.
Good budget execution calls for: (i) ensuring that the budget will be implemented in
conformity with the budget legislation; (ii) adapting the budget to changes in the
economic environment; and (iii) managing the use of resources efficiently and
effectively. In turn, fiscal discipline, allocative efficiency and operational efficiency
require that (i) effective controls at each phase of budget execution are in place to
ensure that obligations and disbursements do not exceed appropriations; (ii) an
adequate and transparent reporting system showing all movements on appropriation/
allotment/ obligation/ cash expenditure is installed to track transactions at each
stage; and (iii) budget funds are released in a timely manner to support
implementation of government programs.
In practice, the allotment system is one way of ensuring that obligations do
not exceed authorized levels. But perhaps more importantly, the system aligns the
release of spending authority with the projected inflow of tax collections and other
revenues. The UBOM (DBM 2005) specifies the use of the Local Budget Matrix
(LBM), the Cash Program and Physical Performance Targets as the control
devices in the allotment system.
The LBM reflects the overall plan of the LGU for the release of allotments by
department/office/program/project and by object of expenditure. It also paces the
release of allotment advice by categorizing the different expenditure items in the
appropriation ordinance into those not needing clearance (NNC) and those needing
clearance (NC) prior to the release of the allotment advice. Thus, the classification
determines how easy it is to get the allotment advice for the different expenditure
items. The release of the for later release portion of the allotments for said items
depends on the results of the periodic evaluation of the physical and financial
performance of the department/ office/ project concerned.
The LBM also allows the imposition of reserves. It may set aside a certain
portion of the authorized appropriation of every department/program to cover for any
possible shortfall in revenue.
As discussed in the UBOM, the allotment system requires a system of cash
monitoring and programming through the use of periodic Cash Flow Forecast and
Cash Flow Analysis. These tools are essential to ensure that allotments are safely
covered by cash or by future collections and that cash is available when it is needed
to pay obligations.
On the other hand, the Physical Performance Targets contains the targeted
performance indicators of each department/office of the LGU. These performance
indicators serve as standards/guides for the physical and financial performance of a
department/office.
By focusing on the control of allotment releases, the allotment system forms
the first line of defense in expenditure control. However, while the UBOM outlines the
specific steps LGUs have to take and the specific forms LGUs have to use in the
preparation of the Cash Flow Forecast and Cash Flow Analysis, there is little
guidance available on the technical aspects of cash flow forecasting and cash follow
analysis.
6
D.
Recommendations1
1.
An LGU public
instituted.
expenditure monitoring system must be
Because of the balanced budget provision in the LGC, the fiscal performance
indicators in the Local Government Performance Monitoring System should include
the current fiscal balance as a measure of LGU savings and its contribution to the
pool of resources that is available for investment. Still another measure of fiscal
performance which may be included is the overall fiscal balance as a summary
measure of LGUs borrowing requirement. The overall fiscal balance allows
government to focus on the financing constraint which has traditionally been viewed
as governments most binding constraint. In addition, some debt management
indicators may also be considered, e.g., a measure that assesses the size of debt
service relative to LGU income and one that compares the amount of cash outflows
to amortize/ redeem past debt relative to amount of cash inflows from the incurrence
of new debt.
At the same time, the amount available for appropriation is another important
indicator of fiscal performance that should be monitored on a regular basis. It is also
important for LGUs to be able to arrive at good estimates of this measure in order for
them to be able to delimit how much they can legitimately subject to further
appropriation.
The monitoring of these indicators would give the oversight agencies
Department of Interior and Local Government, Department of Finance, and National
Economic Development Authority a better appreciation of the performance of LGUs
in managing their respective and collective budgets and thus institute more efficient
and effective measures of ensuring that optimal results are achieved.
2.
The public expenditure management capacity of LGUs must be

strengthened.
It is clear from the description of the current LGU public expenditure

management practices that there is an urgent need to equip LGUs with the
knowledge and skills necessary for them to be able to execute the processes that
would make public expenditure management more efficient.
The guidelines, processes and procedures governing the preparation, review
and execution of the budget are well laid out in the Updated Budget Operations
Manual. It outlines the specific steps LGUs have to take and the specific forms LGUs
have to use as they go through the budget cycle in a manner that will ensure that
they comply with the process and documentation requirements of law on local
budgeting.
However, there is a need for a handbook to complement the UBOM. The
handbook should aim to (i) communicate a policy framework for LGU budgeting that
is anchored on the basic principles of public expenditure management, and (ii)
provide LGUs with tools and techniques that will help them incorporate these tenets
in their budget processes. Explaining the policy framework is important there is a
need to put into proper perspective the various processes that are part of local
budgeting, and to provide the motivation for undertaking these processes. On the
All the recommendations in this paper are summarized in the Attachment.
7
other hand, there is also a need to equip LGUs with the tools that will assist them on
the more technical aspects of budgeting.
In particular, there is a need to upgrade the technical capacity of LGUs in
formulating honest and realistic estimates of income and sources of budget finance,
including the amount available for appropriation at the end of each fiscal year. There
is also a need to build up the technical capacity of LGUs to do cash flow forecasting
and cash flow analysis. These are essential inputs to a better functioning allotment
system that will assist LGUs strike the right balance between fiscal conservatism and
the need to provide the services that local communities are in dire need of.
Simple spreadsheet models for cash flow forecasting and cash flow analysis
have been developed. To further assist LGUs, the DBM may also wish to establish
benchmarks against which LGUs can compare the results of their cash flow forecasts
and cash flow analysis to aid their decision making process as to the timing of the
release of reserves, revisiting the revenue generation strategies of the LGU, and
revising the methodology for revenue forecasting.
The DBM may also wish to consider providing guidance on what steps LGUs
need to take in the event of an impending fiscal deficit. For instance, is there need for
Sanggunian action or resolution authorizing the local chief executive to reduce
allotments without need for further consultation with the Sanggunian once it is
established that actual revenues for the fiscal year will be lower than the estimates of
income that were used in preparing the budget? Are the existing guidelines
pertaining to the allotment system not enough to address this problem?
II.
Managing the LGUs' Personal Services Expenditures Better

LGUs' allocation for personal services (PS) accounts for almost half of
their total budget. There therefore has to be an effective control
especially over this expenditure item, otherwise the quality and
quantity of local services provided by LGUs would deteriorate. Any
increase in this expenditure will mean lesser resources for non-PS
items, namely, maintenance and other operating expenses (MOOE)
and capital outlays (CO), both of which are equally important in
enabling LGUs to deliver services to their respective constituencies.
Yet, excessive control over PS expenditures may mean LGUs not
being able to recruit and retain quality staff, encourage productivity,
and avoid corruption.
A.
The current situation in PS expenditures of LGUs
The World Bank notes that, as a rule of thumb, when the expenses for
personal services (PS) of the public sector rises over 25% of total spending,
governments risk reducing their effectiveness by cutting down expenditure for nonwage costs such as those for goods and services, maintenance, and capital
expenditure. In the Philippines, PS accounted for an average of 45% of total LGU
spending in 2000-2007 while MOOE and CO accounted for 37% and 18%,
respectively. The budget share of PS was highest for municipalities (53%), followed
by provinces (46%) and cities (41%). Lower income class municipalities tend to have
higher PS spending. The situation is worse in LGUs which use job order hirees (who
are charged against MOOE) to work on tasks that would normally be assigned to
regular employees in order to avoid exceeding the PS cap. Section 325 of the Local
8
Government Code (LGC) provides that 1st to 3rd income class LGUs should not
budget more than 45% of its total annual income from regular sources in the
preceding fiscal year on PS. For 4th to 6th class LGUs, the limit is 55%.
Many LGUs fail to comply with the PS cap. Fifty-eight percent of provinces,
40% of cities and 75% of municipalities exceeded the PS cap prior to the application
of the waivers in 2007 on certain PS expenditure items from the computations to
measure compliance with the PS cap. Regardless of level of local government, the
percentage of LGUs that are not able to meet the PS cap requirement tends to be
higher for LGUs belonging to the lower income categories than for those belonging to
the higher income categories.
B.
Factors Hindering LGU Compliance with the PS Cap
The inability of LGUs to comply with the PS cap has been the result of factors
related to staffing and compensation levels.
1.
Staffing concerns
Issues on LGU staffing include (i) the overall size of the LGU personnel
complement, (ii) the existence of too many casuals and contractuals, and (iii) the
existence of too many unfilled regular positions. The rise in PS expenditures of LGUs
may partly be due to the expansion of the LGU organizational structure and
increases in the total number of positions in LGU plantilla as a result of the devolution
of government functions to the local level under the LGC. Other operating units have
also been created, mainly to handle local economic enterprises (LEEs). Both factors
have exacerbated the already problematic situation brought about by the need of
local chief executives (LCEs) to be the "employer of last resort by hiring large
numbers of employees/ casuals in the lowest salary grades as a response to the lack
of employment opportunities in their jurisdictions.
a.
Overall size of LGU personnel complement.
The number of personnel in LGUs has increased considerably from 189,878

in 1984 to 316,023 in 1994 and 377,227 in 2004. This implies that the population-topersonnel ratio went down from 286 in 1984 to 211 in 1994 and 220 in 2004.
Affordability is a major factor that influences the decisions of LGUs on how
many, who, and at what position, to hire. Higher income class LGUs generally have
larger staff complement. Moreover, the size of the LGU population clearly has some
impact on decisions regarding the appropriate size of its staff complement.
There are wide variations in the average number of personnel and the
population-to-personnel ratios across different levels and income classes of LGUs.
These variations point to the need to rationalize of the size of the LGU staff
component. It is, however, worthy to note that, while there are indeed indications of
overstaffing in some LGUs, skills shortage in specific sectors, particularly the health
sector, in many LGUs cannot be denied. Nonetheless, some LGU officials have
expressed interest in seeking guidance on organizational structure, staffing pattern,
and appropriate size of an LGU personnel complement.
b.
The existence of too many casuals.
The average number of casual employees per LGU rose from 157 in 2006 to
182 in 2008; from 207 to 215 for cities; and from 18 to 23 for municipalities. This
9
growth in the number of casuals in terms of absolute numbers appears to be minimal
and may even be consistent with the growth in population.
However, non-regular employees, consisting mostly of casual employees,
account for a significant percentage of the total number of LGU personnel. In 2007,
provinces had an average of 168 non-regular employees or 18% of total, cities had
an average of 304 or 30% of total, and municipalities had 27 or 25% of total The
compensation of non-regular employees in provinces, cities and municipalities
remains very close to the minimum wage.
The large number of casuals in LGU plantilla is partly the result of the hiring of
such personnel to pay political debts. After hiring these personnel, LCEs are then
forced to "make" or "create" work for them. Thus, some casuals are assigned to do
regular technical work, sometimes with less-then-optimal competency.
The situation is made worse by the existence of many permanent casuals
whose contracts are renewed continuously. These casuals exist because many of
them do not meet the qualification standards of plantilla positions. Some LGU
officials also prefer to retain the status of casual employees as these tend to be more
productive and efficient than their permanent counterparts because of the fear of
being fired anytime.
c.
The existence of too many unfilled plantilla positions.
Casual employees substitute for permanent employees. Regular positions

are not filled intentionally to accommodate the hiring of these non-regular employees.
2.
Pay and compensation concerns
Public sector compensation policy should be focused on arriving at "a level

of pay that is consistent with the operation of a motivated and professional public
service at a scale the government can afford on a sustained financing basis. Thus,
fiscal sustainability should be primordial in the LGUs hierarchy of objectives in
coming up with such a policy. The same policy must also involve:
a
b
c
d
Bringing pay in line with governments overall policy objectives;

Determining the basis for pay which consists of the appropriate
mix of primary factors (e.g., affordability, job content) and
secondary factors (e.g., cost of living, market-based pay,
qualifications, and individual performance);
Establishing an appropriate compression ratio between the
pay of the highest and lowest positions; and
Striking a balance among pay, other benefits (including
pensions) and allowances.
The issues regarding LGU pay and compensation policy include the: (i) PS
cap, (ii) differentiated salary schedules, (iii) the existence of too many allowances,
(iv) Magna Carta benefits for public health workers and public social workers, (v)
grant of unanticipated extra year-end benefits, and (vi) grant of allowances/ honoraria
to NG personnel.
a.
Compliance with the PS cap prior to waivers
10
Provinces which successfully adhered to the PS cap allocated 34%, 45%
and 21% of their budgets in 2007 to PS, MOOE and CO, respectively. Those that did
not allocated 50%, 41% and 10% to the same expense items. In like manner,
municipalities which comply with the PS cap allocated 42%, 46% and 12% to PS,
MOOE and CO, respectively, compared to the 54%, 35% and 10% that noncompliant municipalities provide. These figures underscore the negative impact of
non-compliance to the PS cap and provide a strong argument for sustaining the
budgetary limitations on PS spending that are now found in the LGC.
b.
Adoption of a salary schedule of higher-class LGUs
Senate and House of Representatives Joint Resolution No. 1 of 1994

allowed LGUs other than special cities and first income class provinces and cities to
adopt the salary schedules of higher class LGUs, subject to prescribed conditions
and limitations. Meanwhile, the Manual on Position Classification and Compensation
System of the DBM provides that when an LGU which has adopted a higher salary
schedule finds that it can no longer afford to sustain such schedule, it may revert to
the prescribed or lower salary schedule. However, it must ensure that no diminution
in personnel pay results from the effort.
The ban against diminutions in the salaries of incumbents effectively ensures
that reverting to a lower salary schedule would have little impact on PS spending in
the near to medium terms. Moreover, allowing the adoption of higher salary
schedules, together with the many waivers in computing compliance to the PS cap,
weakens the pressure on LGUs to work within hard budget limits and nullifies the
fiscal discipline imposed by the PS cap. Thus, 78% of provinces which adopted
salary schedules higher than their own in 2007, exceeded the PS cap while only 50%
of those which implemented the schedule of their own income class.
c.
Differentiated salary schedules for LGUs
There are two levels of differentiation in rates of pay for the same positions
in LGUs. One is based on the income classification of the LGU, and the other, on the
kind of city (i.e., highly urbanized cities/ independent component cities vis-a-vis
component cities), the income class of the municipality, and whether or not the said
position is in the province, city or municipality. One could argue that the first level of
differentiation is based on the principle that the LGU staffing and compensation
structures should be set at levels that are fiscally sustainable for the LGU. However,
the premise of the second level of salary differentiation is not as obvious, and should
therefore be revisited and reviewed.
d.
Waivers to the application of the PS cap
Because different agencies review the LGU budgets and therefore the ways
the waivers to the application of the PS cap are applied, the enforcement of the
waivers lacks consistency. Thus, there had been claims that compliance to Local
Budget Circular (LBC) 75 of 2002, which allows the waivers, is a farce.
e.
The grant of allowances and other benefits
The grant of allowances and other benefits should be rationalized. This

would help LGUs live within the PS cap and thus move closer to attaining a balanced
budget.
i.
Too many allowances
11
There are at least 10 allowances mandated by various rules and regulations.

Some of these allowances can be embedded in the base pay. Also, there is a need
to evaluate the other allowances so that those similar could be integrated or
consolidated.
ii.
The grant of unanticipated year-end extra benefits
The grant of year-end bonuses is practice has encouraged LGUs to

deliberately generate savings from its regular activities, sometimes sacrificing the
delivery of government services.
iii.
The grant of PHW Magna Carta benefits to PHWs
Under the Magna Carta of Public Health Workers (Republic Act 7305), PHWs
are granted subsistence allowance, laundry allowance, night-shift differential, hazard
pay, and longevity pay. These benefits being substantial, many LGUs have not been
giving them all and/or in full. Less than 50% of provinces, cities and municipalities
gave the subsistence and the laundry allowance at the prescribed rates in 2007. The
number of LGUs giving the hazard pay at the correct rates is even smaller.
The Magna Carta of PHW is a especially sensitive matter at the local level as
it creates conflict between the LCE and other officials, on one hand, and the PHWs,
on the other, when the Magna Carta allowances are not granted in full or not granted
at all. There are many reports of cases filed in the courts or Ombudsman against
LCEs and other officials by PHWs due to non-implementation of the Magna Carta
benefits.
iv.
The grant of allowances to national government

personnel
The LGC allows LGUs to grant additional allowances and benefits to certain
national government officials stationed or assigned in their areas, when LGU
finances allow. Although the granting of these allowances is not required, LGUs are
put under extreme pressure to actually grant them. The grant of these allowances
imposes a heavy burden on LGU resources, especially that of poorer LGUs. It also
creates the anomalous situation where the national government personnel actually
get allowances from a number of sources (from different LGUs as well as from their
own mother unit).
C.
Impact of various PS cost items on the ability of LGUs to comply with

the PS Cap
Of all the cost items under the PS budgets of LGUs, the Magna Carta benefits
to PHWs appears to have the smallest impact on the ability of LGUs, regardless of
level, to comply with the PS cap. In contrast, the number of non-regular employees
appears to have the biggest impact, especially in the case of cities and
municipalities. The proportion of cities which would not be able to comply with the PS
cap is estimated to go down from 40% to 16% if the PS cost of non-regular
employees is excluded from LGUs actual PS expenditures. The decrease in the
number of similar municipalities is from 75% to 66%. The impact of the adoption of
higher salary schedules is found to be also significant. The proportion of cities which
would not be able to comply with the PS cap is estimated to go down from 40% to
31% if all LGUs adopt the salary schedules that are prescribed for their own income
12
class. The decrease in number among municipalities is from 75% to 68% while that
for provinces is 58% to 52%.
D.
The impact of the third phase of the salary standardization program
There is a proposal pending in Congress to adjust the government salary

schedule upwards as part of the third wave of salary standardization . This proposal,
known as SSL3, aims to correct the erosion of real public sector wages and salaries
in recent years and to decompress the wage structure in the public sector. Its full
implementation, however, will increase the LGUs' wage bill by 82%-102% for
municipalities, by 78%-94% for cities, and by some 69% for provinces. It will
therefore make it difficult for LGUs to keep their PS spending below the PS cap.
E.
Recommendations
The following measures are recommended to help ensure that LGUs could
effectively control their PS expenditures while making sure that they have enough
qualified personnel to enable deliver the needed services to their constituencies and
while improving salaries and benefits to attract and retain qualified technical,
professional and managerial staff.
1.
The cap on LGU spending on PS should be retained and strictly

enforced.
This recommendation, which should put more pressure on LGUs to live within
hard budget constraints, is based on the premise that service delivery requires a mix
of both wage and non-wage spending. If spending is too much in favor of PS, service
delivery suffers because supplies, travel and other resources, all of which are needed
to complement personnel resources as well as to provide for local public
infrastructure needed for local economic development, are sacrificed.
2.
LGUs should be allowed to choose any of the eight alternative

salary schedules provided in Section 10 of RA 6758..
LGUs should be allowed to choose which among the eight alternative salary
schedules provided in Section 10 of RA 6758 it would adopt based on what they
think is best suited to their particular situation, considering, among other factors, their
fiscal capacity, and provided that they comply strictly with the PS cap. In other words,
LGUs should be given the flexibility to set their own compensation and pay policy as
long as they work within the constraints imposed by the fiscal resources that are
actually available to them.
3.
Most, if not all, of the waivers to the application of the PS cap

should be eliminated as they seriously undermine fiscal discipline.
4.
The parameters that form the basis for assigning different salary
grades for higher level positions in LGUs of different income class
and different levels should be reviewed and, if warranted, amended.
5.
The practice of granting additional/extra year-end benefits

subject to the availability of funds at the level of the operating
unit as the budget year closes should be discontinued. This would
help improve public expenditure management at the local level.
13
6.
The relevant sections of the LGC should be amended to disallow

the grant of additional allowances and benefits to national
government officials assigned to LGUs. This provision puts undue
pressure on LGUs to provide such allowances at the expense of local
service delivery.
7.
The implementation of benefits under various Magna Carta

legislations should be coordinated with the implementation of
the overall compensation structure of government, especially
under SSL3.
Congress should consider the granting of Magna Carta-type benefits to all

government employees instead of special groups only. The desire to provide higher
pay to PHWs, particularly doctors and nurses, who are deemed to be underpaid
relative to the demand for their services in the local as well as foreign labor markets
is understandable. However, this concern might be addressed better by adjusting the
salary grades that are currently assigned to these positions instead of providing
blanket salary top-ups to all PHWs.
8.
The model organizational structures for LGUs should be

reviewed and, if necessary, redefined with corresponding staffing
patterns (by level and income class).
The model staffing patterns may indicate the minimum and maximum
numbers and the levels of positions for each LGU level and income class. Moreover,
there is a need to establish criteria and/ or benchmarks that LGUs can refer to in
deciding on the staffing pattern that is appropriate for their particular situation.
This effort could possibly lead to a more compact list of plantilla positions that
include only positions that are needed for the delivery of the core mandates of LGUs.
Fixed-term employment contracts may then be considered for personnel who are
focused on the delivery of priorities that are not part of the core mandates of the
LGU. The tenure of department heads and heads of the various offices may also
have to be reviewed, weighing the trade-off between the need for personnel who
have the full trust and confidence of the LCE, and the need to promote continuity in
public administration at the local level.
III.
Operating Local Economic Enterprises More Efficiently

For most LGUs, local economic enterprises (LEEs) represent a drain in
resources as these operate continuously at a loss which, in most cases,
is substantial. Limiting the losses from these enterprises would mean
more resources freed up for the delivery of more and better government
services.
A.
Status of Local Economic Enterprises
The LEEs has been increasing considerably over time. In addition to the
traditional LEEs like markets, slaughterhouses, and water service facilities, todays
LEEs include enterprises that produce goods and services that are usually provided
by the private sector, such as shopping malls and buildings for lease. These LEEs
involve more complex operations than the more traditional ones. Moreover, many
14
LGUs are now operating more than one LEE. On the average, cities operate more
than four; municipalities. more than three; and provinces, two.
Markets and slaughterhouses are still the most popular forms of LEEs, with at
least 90% of municipalities and cities operating markets, and at least 70% operating
slaughterhouses. However, a sizable number of LGUs also operate the more nontraditional types of LEEs, such as public transport terminals, garbage collection and
disposal facilities, and parking lots.
There are primarily three reasons why LGUs create and operate LEEs. First,
LGUs are looking for more sources of income. LEEs accounts for 11%-12% of the
total own-source revenue of all LGUs and around 4% of their total income in 20052007. Second, LGUs need to have catalytic investments, which LEEs are, to
generate greater local economic development. Third, some LGUs need to hire more
personnel without going over the personal services (PS) expenditure cap in the LGC
and to be able to grant allowances to LEE employees.
LGUs operate LEEs at a loss, with 77% of provinces, 63% of cities, and 56%
of municipalities posting net losses on their LEE operations in 2007. These losses
totaled PhP 11.8 to 13.4 billion that year. The total income from LEEs accounted for
less than a third of their total cost of operations.
All hospitals and heavy equipment motor pools operated by LGUs as LEEs
are unprofitable; so are 86% of tertiary schools and 50% of all slaughterhouses,
markets, and cemeteries. In contrast, 60% of water systems would be profitable.
A number of factors lead to net loses in LEE operations. One is the weak
institutional support, mainly in the form of policy and infrastructure, given by the
LGUs towards their LEE operations. Another factor is the weak technical capability of
the LGUs in assessing the feasibility of LEEs and later, in the setting and collection of
fees, and in the overall management of the enterprise.
B.
Outstanding Issues and Recommendations
The LGUs management of LEEs can be made more efficient and therefore profitable
if (1) a clear policy framework for the creation and continued operation of LEEs is
established, (2) how LEEs are to be treated in budgeting is made clearer; and (3) the
LGUs' capacity to operate LEEs is strengthened.
1.
The need for a clear policy framework for the creation and
continued operation of LEEs
Setting a clear policy framework for LEEs starts with a clear definition of what
LEEs are, something which is lacking in the laws and rules and regulations
concerning these enterprises. Both the LGC and the Manual on the New
Government Accounting System (NGAS) for LGUs do not have an explicit definition
of the term economic enterprise. Meanwhile, the definition of the Updated Budget
Operations Manual or UBOM is vague and does not emphasize the need for LEEs to
earn enough for their operations.
Taking this enterprise dimension into
consideration, it is proposed that the oversight agencies (DBM, DOF/ BLGF, DILG,
and NEDA) define LEEs as local government owned economic entities that
generate the bulk of their revenues from selling goods and services.
There is also a need to clarify why these enterprises are created. The UBOM
provides that LEEs must (a) satisfy both the economic and social objectives of the
15
concerned LGU; (b) fill in service gaps not adequately provided by the private sector;
(c) operate with a lean and mean staffing complement to satisfy the income objective
of the economic enterprise/ public utility; and (d) operate like a corporate body with a
separate strategic plan and budget. These guidelines, however, seems to be biased
for LEEs being operated by LGUs and do not provide (a) guidance on what the
different alternatives to the creation of LEEs are, and (b) cautionary statement on
potential government failures that may arise with the establishment and continued
operation of LEEs.
As a result of the weaknesses in the LEE policy framework, LEEs have not
been limited to producing goods/services not being provided by the private sector
and actually compete directly with private sector enterprises. They have also not
achieved any level of cost recovery and do lose year after year. Finally, they have
not operated like a corporate body and thus failed to achieve efficiencies and
independence from political interference.
It is therefore recommended that a new policy framework be
constructed that would revolve around the following principles: (a) that LGUs need
to focus on their core functions; (b) that private sector-led development is superior to
government-led development unless a strong case can be made for government
intervention; (c) that some marketable goods/services are better delivered by the
central government rather than LGUs; and (d) that LEEs are only one of a number of
ways of delivering service.
Thus, when an LGU is confronted with the need to decide whether or not to
provide a given good/service, it should first check whether or not delivering the good
or service is aligned with its goals and core functions. Once it decides that it is, it
should assess whether or not government should be the one to deliver the good or
service. If it decides that it should be government, it should decide if it is an LGU or
the central government which should deliver the good or service.
If it is the LGU that could best deliver the good or service, it could do so either
(a) through external organizations like private sector enterprises and nongovernmental organizations (NGOs) via various types of public-private partnerships
arrangements like service contracts, management contracts, leases, concessions,
and licenses or (b) directly, either through an LEE or through a regular unit or office
inside its organization. In deciding if it should take on the responsibility of providing
the service or good by itself, the LGU must strike a balance between the need to
ensure that LEEs operate efficiently and at least recover their operating costs, on one
hand, and the need to promote the public interest, on the other. It is widely believed
that LGUs, more than LEEs, can make services or goods more accessible and
affordable to the poorer segments of the community. The LGU must also consider if
it can afford doing so with its present fiscal position being what it is. If it determines it
could not, it should abandon the plan.
In engaging in public-private partnerships, LGUs must bear in mind that
public-private partnerships may be limited by (a) the availability and capacity of the
private organizations to deliver services, and (b) the capacity of the LGU to manage
the contractual and regulatory arrangements which can be both complex and costly
at times. They must also remember that, based on international experience, publicprivate partnerships tend to be successful when (a) the LGU does not assume all of
the financial risks in the partnership while being able to maintain control over the
delivery of the services; (b) the LGU is able to come up with a precise definition of
the required service delivery levels; (c) there is transparency in the regulation of the
external providers performance; and (d) the LGU has access to the technology,
16
expertise and experience that is more often available to the external provider.
However, these advantages exist only if (a) there are several providers capable of
providing the service at comparable cost and performance; (b) the LGU can properly
assess the external service provider's performance; and (c) corruption and other
ethical problems do not come into play.
The new policy framework should provide explicit guidance on the creation of
LEEs. The guidance should specify that LEEs should be established by enacting an
ordinance that specifies, in unequivocal terms, (a) the LGU policy on the degree of
cost-recovery that the LEE needs to achieve, (b) tariff rates or user charges that will
be charged for goods/ services provided by LEE, and (ci) who will be subsidized and
by how much, including the schedule of rates by income bracket of clients where
applicable.
The decision-making process for the establishment of LEEs is illustrated in
the figure below.
Figure 1. Graphical Presentation of LGU Decision Making Process Relative
to Creation of LEEs
Doestheservicecontribute
toachievementofLGU
goals?
AlternativeServiceDeliveryOptions
Privatization
Yes
No
Abandon
ServiceShedding
Divestiture
Istherealegitimateand
necessaryrolefor
governmentinthisservice?
Yes
ShouldtheLGUhaveprimary
responsibilityforthis
service?
No
PasstoNG
PublicPartnershipi.e.SharedServices
Yes
Could,orshould,thisservice
beprovidedinwholeorin
partbytheprivateor
voluntarysector?
Yes
Partner
No
Istheserviceaffordable
withinfiscalrealities?
No
Abandon
Yes
Yes
Iscorporatizationfeasible
anddesirable?
ContractingOut
Service,Management,Lease&ConcessionContracts
BuiltOperateTransfer
i.e.BT,BLT,BOT,BOO
Public/PrivatePartnerships&JointVentures
Includingwithprivatenotforprofitentities
(NGOs/CSOs)
Congress
createsGOCC
GovernmentOwnedandControlledCorporations
i.e.,LGUInc.
No
LGUcreatesLEE
LocalEconomicEnterprise
OrganicUnitinLGU
Adaptedfrom:SEQUUS.2003.DevelopingthePublicEconomicEnterpriseinthePhilippines TheLGSPWay,Draft
reportsubmittedtotheLocalGovernmentSupportProgram(LGSP),CanadianInternational
DevelopmentAgency(CIDA).
The new policy framework should likewise reiterate the importance of the
maintenance of special accounts for LEEs as prescribed by the COA under the
NGAS. The maintenance of special accounts for LEEs is essential in tracking the
17
results of LEE operations and how closely LGUs follow their intent for creating LEEs.
In addition, the framework should institutionalize the periodic review of the operation
of existing LEEs to help LGUs decide whether or not these LEEs deserve to continue
their operations.
2.
The need to clarify the treatment of LEEs in the LGU budget
In practice, different LGUs treat LEEs in different ways when they prepare
and execute their budgets. There are LGUs that treat their LEEs just like any other
unit/office when they prepare their. The income of their LEEs is shown as part of the
income estimate for the General Fund while all expenditure proposals related to LEE
operations are shown as part of the expense items in the proposed budget.
Some other LGUs treat their LEEs off-budget so that the LEEs' income and
proposed expenditures do not form part of their total income estimates and proposed
budgets, while subsidies (if any) are shown as an expenditure item in their proposed
budget. LEE incomes are then credited to an intra-agency receivable account known
as due from operating units account while LEE operating expenditures are debited
from the same account. In this way, income derived from the operation of LEEs is
used in the payment of operating expenses without passing the usual budget
procedures.
This practice is in direct violation of the basic principle of local fiscal
administration that no money shall be paid out of the local treasury except in
pursuance of an appropriations ordinance. It is also not consistent with the one
fund principle under which the governments budget should cover all transactions
financed with public funds. It should be stressed that the one-fund principle applies
to LEE expenditures because LEEs do not have a separate legal persona as they
cannot be corporations under the existing legal framework. Instead, under the LGC,
LEEs are still part of the General Fund. However, special accounts within the
General Fund should be maintained for each LEE.
Despite these problems, it has been argued that the practice be allowed and
even encouraged since it allows LEEs to retain at least a significant portion of their
income so that they will have the incentive to improve their efficiency. To take this
concern into account, at least partially, while at the same time emphasizing
transparency and accountability, it is recommended that the LGU budget be
presented in 3 parts. Part 1 would show the income estimates and spending
proposals (including subsidy to LEE) for the General Fund Proper. Part 2 would show
the income estimate and spending proposal for the LEE. This implies that
Sanggunian authorization for LEE spending is required. Part 3 would show the
consolidation of Parts 1 and 2. This budget format is not only more transparent than
current practice, it also provides incentives for LEE managers to improve their
collections since they are better able to isolate their earnings from the rest of the
General Fund Proper.
Aside from the need to more clearly prescribe how LEE budgets are to be
treated in the budget preparation and execution of LGUs, there is also the need to
lessen, if not prevent, the abuse of the provision in the LGC that excludes the PS
expenditures of LEEs from the total PS expenditure of an LGU. This provision had
created the incentive for some LGUs to use LEEs to circumvent the current
prohibition for PS expenditures not to exceed 45% or 55% of an LGU's total annual
income, depending on the income classification of the LGU.
18
To address this concern, it is recommended that the favorable treatment
given to the PS spending of LEEs be retained but that its application be limited
to LEEs which are created by ordinance and which have a well-defined policy
on cost recovery.
3.
The need to strengthen LGU capability relative to the creation

and operation of LEEs
LGU capacity in the following areas needs to be strengthened if LEEs are to

be managed more efficiently, and it is recommended that measures be
undertaken to develop and implement human resources development
initiatives toward this end:
a.
b.
c.
d.
evaluating alternative modes of public-private partnerships;

evaluating when to create new LEEs or when to continue the
operations of existing ones;
drafting of ordinances for the creation of new LEEs, including the
formulation of the subvention policy;
improving LEE operations in:
i.
ii.
iii.
iv.
e.
f.
development/evaluation of feasibility studies, especially the

forecasting of demand,
tariff setting,
collection procedures and systems, and
evaluating alternative organizational structures for the
management and monitoring of LEEs;
conduct of periodic review of existing LEEs; and

evaluating alternative divestment modes.
These needs can be answered by the conduct of appropriate training and

other capability-building programs, including giving LEE personnel the opportunity to
acquire more education in the required areas. They can also be answered by
recruiting personnel with the correct qualifications.
There are a number of actions that LGUs can implement to make their
running of existing LEEs more efficient and therefore allow these enterprises to
recover costs. Among the more important of these actions is the adoption of
corporate business practices through the:
a.
Use of market-oriented pricing of services based on:

i.
ii.
iii.
b.
market surveys;
all identified costs to be recovered, e.g., MOOE, depreciation,
amortization of capital and interest expense; and
the inherent advantage of LGUs in LEEs such as exemption
from taxation and some regulatory requirements,
best
sites/locations and security arrangements;
Establishment of sound financial management by:

i.
improving collection performance by collecting monthly

charges regularly and promptly, collecting overdue collectibles,
and stricting enforcing of internal control measures, e.g., closer
19
ii.
c.
supervision of collectors thru regular reshuffling and daily

liquidation of collections; and
preparing quarterly statements of income and expenses and
year-end financial statements consisting of the Balance Sheet,
Statement of Income and Expense, and Statement of Cash
Flows for each LEE; and
Implementation of proper asset inventory and management by the

renting out of under-utilized assets and leveraging for the more
productive use of assets and facilities that are not effectively used.
In planning for new LEEs, LGUs should also adopt corporate business
practices. It should:
b.
Justify the proposed LEE within the approved Local Development

Plan; and
c.
Conduct pre-feasibility analysis that determines the following:

i.
ii.
iii.
technical viability and preliminary design;

financial viability tested against project revenue, project cost to
include cost of mitigating environmental, social and other
impacts and of course risks, and other quantitative indicators
of profitability or non-profitability, such as discounted cash
flow, internal rate of return, payback period, and results of a
cost-benefit analysis; and
economic viability measured against local and national
economics, as indicated by the Economic Internal Rate of
Return (EIRR), which is measured based on the projects
effect on local employment and the public and health sectors.
In both existing and planned LEEs, having the correct organizational structure
for their management is vital. The following structures are suggested:
IV.
a.
An LEE unit (LEEU), which is charged with the management of LEEs,

is placed in the office of the mayor under the immediate supervision of
the local administrator. This arrangement is appropriate for some
LGUs with markets and slaughterhouses only as their LEEs;
b.
The LEEU under the supervision of the local treasurer. This

arrangement would be acceptable in small LGUs where the office of
the local mayor is not adequately staffed; and
c.
A separate department for LEE operations in the LGU bureaucracy.

This is the preferred structure where a number of enterprises have
been established by the LGU.
Using the Special Education Fund More Effectively
20
The SEF is not being spent where it ought to to be spent if it is to address
the most urgent problems in public education today.
A.
The Fund
The Special Education Fund (SEF) of all LGUs grew from PhP 8.5 billion in 2001
to PhP 14.2 billion in 2007, so did SEF expenditures which increased from PhP 7.8
billion to PhP 12.1 billion in the same period. While it does not seem large when
compared to either total government spending on education (7%-9%) or total
Department of Education (DepEd) spending (7%-10%), SEF expenditures are
substantial compared to what DepEd spends for non-personal services (41%-86%)
or for maintenance and operating expense or MOOE (71%-142%). Moreover, SEF
expenditures are estimated to be about 2.4 times the total DepEd allocation for
school level MOOE.
B.
Allocation Patterns of the SEF
These substantial resources, however, are not spent efficiently. They are not
being spent on what needs to be funded most, where they could do the most good.
1.
Allocation for teachers
The Department of Education (DepEd) had reduced the number of teachers

needed nationwide, from 37,986 in school year (SY) 2003-2004 to 9,333 in SY 20072008. Despite this development, LGUs nationwide spent more of their SEFs on
hiring teachers, allocating 29% of their SEF on personnel services in 2008 as
compared to 27% in 2006. The number of SEF-funded teachers who were assigned
to public elementary schools rose by 24%, from 2004 to 2007, while the number of
locally funded teachers charged against the General Fund (GF) of LGUs increased
by 33%. The trend was the same among secondary schools.
What makes matters worse is that LGU/SEF-funded teachers are not
deployed as they should be. The total number of LGU-funded elementary teachers
hired in SY 2007-2008 was 5,648 more than the number of teachers needed
nationwide. A total of 12,017 of these teachers were assigned in schools that had
more teachers than they could use. At the same time, the number of teachers who
were assigned in public elementary schools that lack teachers was 6,369 less than
what was needed. Meanwhile, at the secondary school level, the actual number of
teachers funded out of LGUs GFs and SEFs was 8,915 less than the required
number in all teacher-deficit public schools in SY 2007-2008. In contrast, the actual
number of LGU/ SEF-funded teachers in all teacher-rich public secondary schools
exceeded the required number by 8,006.
2.
Allocation for capital outlays
Despite the fact that the lack of classrooms continue to be serious, the share
of capital outlays in the total SEF declined from 30% in 2006 to 23% in 2008.
Expenditures for the building and repair of classrooms are charged against Capital
Outlays.
3.
Allocation for sports competitions
21
Still another misalignment of SEF spending is the amount of funds allocated
to sports competition, which account for from 10% to 30% of the budget of an LSB.
This level of support persists even if RA 9155 had already transferred all functions,
programs and activities of the DepEd related to sports competition to the Philippine
Sports Commission.
4.
Allocation for Citizen Development programs and co-curricular

activities
Although it varies across LGUs, the allocation for citizen development

programs and co-curricular activities in LSB budgets ranges from 5% to 25% of the
total. The activities supported under citizen development and co-curricular programs
include academic competitions at various levels including quiz bee, math contests,
science fairs, cultural contests, music festivals, and press conferences. The holding
of these activities must be rationalized because they are not only costly to support
but also because they take the time of teachers and students away from the
classroom.
5.
Use of the SEF to pay for the cost of tax collection
Finally, a number of LGUs charge against the SEF some expenses related to
the cost of SEF collections like the cost of accountable forms (e.g., receipts) and
personnel doing work related to either RPT assessment and/or collection. The
charging of these costs is in violation of the LCG.
C.
Factors Hindering the Optimal Allocation of the SEF
That the potential of SEF spending is not maximized is mainly the result of
three factors:
1.
The LSB budget allocation process
How the SEF is allocated depends on what the DepEd division

superintendents/ district supervisors recommend. Many local chief executives
(LCEs) and Sanggunian representatives to the LSBs follow what the DepEd
representatives to the LSBs propose since they presume the former to be better
informed of the needs of the schools. However, under RA 9155, the school district
supervisor's job is largely limited to curriculum and instructional supervision.
Meanwhile the division superintendents are tasked with using funds provided to the
schools under their respective jurisdictions, including those provided by the LGUs,
and implementing the division education development plan. It is the school heads
that are made responsible and held accountable by RA 9155 for preparing and
implementing school improvement plans and for administering and managing the
fiscal resources of the school. The school heads are therefore better equipped to
represent the needs of schools to the school boards.
2.
The mismatch between the indicators

performance and SEF expenditure patterns
of
educational
The DepEd had installed various instruments and protocols (mostly based on
the Basic Education Information System), such as the teacher deployment analysis
and the classroom shortage analysis, to measure education performance. The
results of these analyses are available and should provide good support for
evidenced-based resource allocation at the school level. Unfortunately, these
22
feedback have not be used extensively, if at all, in determining what priority areas get
SEF resources through LSB budgets.
3.
Unclear policy regarding the priorities mandated for the SEF
The LGC mandates that priority be given to, among other activities, sports
activities at the division, district, municipal, and barangay levels. However, RA 9155
transferred all functions, programs and activities of the DepEd related to sports
competition to the Philippine Sports Commission (PSC) while retaining school sports
and physical fitness as part of the basic education curriculum. There appears to be
some confusion on where one exactly draws the line between school sports and
physical fitness and sports development/ sports competition.
Moreover, the use of the term operation and maintenance of public schools
in Section 272 of the LGC is the subject of varying interpretations. On the one hand,
the ambiguity in the use of the term operation and maintenance gives LSBs greater
flexibility to respond to actual needs at the school. On the other hand, one of the
guiding principles of good expenditure assignment in fiscal decentralization is the
need for greater clarity in the assignment of functions across levels of government.
This stems from the fact that if all levels are made responsible for the same
functions, it becomes extremely difficult to exact accountability from any one level of
government.
Related to this, there is a need to clarify expenditure assignment in the
education sub-sector across different levels of government.
D.
Recommendations
The following measures are recommended to improve the efficiency and

efficacy of the utilization of the SEF:
1.
The guidelines on the use of the SEF should be strengthened.
The guidelines for the use of the SEF must be strengthened by improving the
existing guidelines that govern SEF allocation, either by the rules-based or the
"market-based" approach. The former involves the joint issuance by the DBM,
DepEd and DILG of new guidelines containing either a positive list of the types of
expenditure items that may be charged against the SEF, a negative list of
expenditure items that are not allowed to be charged against the SEF, or both a
positive list and a negative list of expenditure items. In the meantime, the latter
involves the oversight agencies recalling all existing guidelines on SEF utilization and
giving LSBs full discretion in the allocation of the SEF while strengthening the
capability of the boards to plan and budget the SEF.
2.
Institutional arrangements should be improved.
The flow of information between the schools and the district supervisors must
be improved to allow the latter to better represent the interests of the former. Clearer
connection must be established between the various instruments and protocols in the
BEIS and the BESRA and the school improvement plan, on the one hand, and LSB
allocation process, on the other hand. In the medium term, there is a need to re-think
DepEd representation in MSBs. The need to have school level representation in the
MSBs would have to be weighed against the practicality of increasing the number of
MSB members. There is also a need to consider expanding the membership of the
LSB to include the head of the cluster of secondary schools in the district as well as
23
the local budget officer. Finally, there is a need to expand the membership of the
LSB to include NGOs, business chambers, and private schools as non-voting
members.
3.
Definitions and use of terms in the LGC and RA 9155 should be

clarified.
There is a need to delineate the line that separates school sports and
physical fitness from sports development/sports competition and thus clarify the
extent of school participation that is expected in the barangay, district, division,
regional and national level of the Palarong Pambansa.
4.
Expenditure assignments in the Basic Education Sector should

also be clarified.
Actual utilization of the SEF overlaps with DepEd expenditure items. The
following insights from experience in other countries may be considered in this effort.
5.
a.
Standard setting, curriculum design. Worldwide, the central

government is generally considered to be better equipped than
state and local governments in formulating a common
minimum educational standard, including curriculum design,
and in addressing equity issues such as the distribution of
teachers and technical assistance to underperforming areas.
b.
Textbook procurement. Textbook production and distribution is

usually centralized in order to harmonize textbooks with the
curriculum design and the development process, although
textbook distribution may be more efficient if left to subnational institutions.
c.
Teacher salaries. Teacher salaries, even in highly centralized

systems, are usually paid from the recurrent budget of the
administrative level to which teachers report. The true extent
of local control over teachers depends on whether or not the
teachers are members of a unified national civil service with
pay scales set by the relevant service commission.
d.
Construction and maintenance. School building construction

and maintenance are traditionally among the most
decentralized education sub-functions in many countries,
although responsibilities are often divided in some, with the
provinces providing for construction and major rehabilitation,
while lower level local government units conducting routine
maintenance.
Responsibilities also tend to be divided
according to the level of schooling. For instance, in some
countries, lower level local governments are responsible for
primary schools, mid-level governments for secondary schools,
and central governments for tertiary education.
Accountability in, and the membership to, LSBs must be

improved.
24
The experience of the Synergeia project sites indicates that the following
elements are key to re-inventing the LSBs:
V.
a.
Performance assessment at the school level and the reporting

of the results of the assessment to the parents and the
community, which tends to improve the accountability of the
school heads by exerting pressure on them to manage school
resources more effectively and efficiently;
b.
The holding of participative events where school officials,

teachers, parents and the community come together to discuss
the current status of basic education, the constraints and
problems faced by the school, and the alternative solutions for
these constraints and problems; and
c.
The expansion of the LSB membership to include NGOs,

business chambers, and private schools as non-voting
members, and thus tap expertise available outside of the
traditional LSB membership, and secure additional resources.
Mobilizing ODA Resources
Official Development Assistance or ODA, which are contributions of donor

governments to developing countries and to multilateral institutions to promote the
economic development and welfare of the recipient countries, is often considered the
best source of external funds for LGUs because it consists of grants, loans with low
interest rates and long repayment periods, and both. Soft loans have interest rates
ranging from 0%-7%; maturity periods of from 10 years to 50 years; and grace
periods of from 5 years to 10 years. These are used for projects which are revenue
generating and lead to capital formation. ODA grants, on the other hand, are
consultant/expert services, equipment, commodities and training which are provided
for free. These are preferred for development projects in the social sectors as well as
for technical assistance types of projects.
A.
ODA Distribution
Practically all provinces have received ODA assistance. However, of the ten
provinces with the most number of ODA projects, the majority is in Mindanao (11)
and the rest, in the Visayas (7). Meanwhile, of the seven (7) provinces with the least
number of ODA projects, the majority is located in Luzon. Except for one, the five
regions with the least number of ODA projects are all in Luzon.
Of the sectors funded by ODA accessed by LGUs, agriculture/agrarian reform
accounted for the most number of ODA projects, followed closely by infrastructure
and then health. Education and social services had the least number of projects
B.
ODA Grants
ODA grants have historically comprised at most 10% of total ODA flows and
their proceeds have accounted for less than 2% of allocations for foreign-assisted
projects, which, in turn, accounted for less than 10% of all projects for 2008 and
2009. The value and share of grant funds to total ODA have been declining, and so
25
has the number of grant projects, which decreased from 237 in 1997 to only 89 in
2007. At the same time, the number of LGUs has been growing, thus increasing the
competition for the increasingly scarce ODA grant funds. To make matters worse,
LGUs also have to compete with the large number of agencies of the NG, both line
and oversight, for ODA. Thus, the the chance of an LGU securing an ODA grant is
low compared to that of getting a locally-funded project.
C.
ODA Loans
ODA loans are a much better prospect for LGUs as sources of funds than
grants. These constitute a much larger share of ODA resources and there are many
loan projects that are meant for collaboration with LGUs. Moreover, the share of ODA
loan-financed projects with LGU participation to total ODA loan projects have been
increasing, from 16.7% in 2000 to 21.1% in 2008. However, the absolute amount of
loans with LGU participation has been declining, even without adjusting for inflation,
mainly because the Philippine Government and its major donor partners have been
moving away from project loans towards program loans. The total amount of ODA
commitments has also been declining, from US$13.3 billion in 2000 to only US$9.7
billion in 2007 and then bouncing back only slightly to US$10.0 billion in 2008. This
decline is partly due to the improving fiscal situation in the country.
1.
ODA-sourced Loans to LGUs through GFIs

a.
Access by LGU Type

i.
Number of Loans
As of 31 March 2009, a total of 323 LGUs have availed of ODA-sourced loans

from the GFIs Land Bank of the Philippines (LBP) and Development Bank of the
Philippines (DBP). Of this total, 248 or 76.8% of the total are municipalities, 54
(16.7%) are cities, and 21 (6.5%) are provinces.
Despite being large, the number of municipalities that have availed of ODAsourced loans represents only a small portion of the total municipalities in the
country. Those availing of ODA loans from the LBP account for 12.6% of the total
municipalities while those borrowers of DBP account for 4%. The number of
provinces that have availed of the same kinds of loans, meanwhile, from the LBP
represents 21.8% of all provinces nationwide, while the number of DBP borrowers
among provinces represents 5.1%. It is the cities which have the highest ratios. The
number of cities with ODA-sourced loans from LBP account for 32.5% of total, while
that of cities with ODA loans from DBP represents 13.7%.
ii.
Loan Amount
Of the total amount of ODA-sourced loans, cities account for the largest
share. These LGUs got 63% or PhP 8.2 billion of the PhP 13 billion lent by LBP and
33% or PhP 1.2 billion of the PhP 3.6 billion lent by DBP. Municipalities account for
the next largest share, getting 29% or PhP 3.8 billion of LBP's ODA-sourced loan
portfolio and 28% or PhP 1 billion of DBP's. Provinces got the smallest share, with
8% or PhP 1 billion of the LBP and 39% or PhP 1.4 billion of the DBP portfolios.
b.
Access by LGU Income Class
26
I.
Number of Loans
First class LGUs have the largest share in the total number of ODA-sourced
loans lent by GFIs. They account for 25% and 35% of the ODA loans lent by LBP
and DBP, respectively. Fourth class LGUs have the second largest share, getting
25% of the ODA loans from LBP and 27.5% of the ODA from DBP. The third largest
share goes to 3rd class LGUs which have 25% and 19% of the LBP and DBP
portfolios, respectively. Meanwhile, 2nd class LGUs got 14% each of the same
portfolios and 5th class LGUs got 11% and 5%, respectively.
ii.
Loan Amount
By a great margin, 1st class LGUs got the largest share of the amount of
ODA-sourced loans from GFIs. These government units got 66% and 74% of the
total loan amounts lent by LBP and DBP, respectively. Fourth class LGUs got the
second largest proportion, accounting for 12% and 10% of the ODA loan portfolios of
LBP and DBP. These LGUs are followed in descending order by 3rd, 2nd, and 5th
class LGUs.
c.
Access by Region
Most regions have 15 to 26 LGUs with access to ODA-sourced loans through

LBP. The exceptions to these are Region V and the Autonomous Region of Muslim
Mindanao (ARMM) which have only 9 or 10 and CAR and NCR which have only one
each.
In the case of the DBP ODA-sourced loan portfolio, Regions II and X had 10
each, Region XII had 9 loans, Regions IV-B and VIII had 8 each, and Region VI had
7. The other regions had five or less loans. These include ARMM and CAR.
d.
Types of Funded Projects
Of the ODA-sourced loan projects funded by the LBP, the most numerous
were water systems (75), solid waste management (SWM) projects (36), public
markets (34), drainage (32) systems, and heavy equipment acquisition (20). In
terms of loan amounts, water systems accounted for PhP 2.1 billion or over 16% of
the PhP 13 billion total, followed by drainage projects with close to PhP 1.4 billion or
10.5%, public markets with PhP 1.1 billion or 8.5% and SWM projects with PhP 0.95
billion or 7.3%. Infrastructure projects totaled PhP5.755 billion or 44.2%, primarily
due to the road projects of Cebu City under the Metro Cebu Development Project.
Of those projects funded by DBP, water systems were the most numerous
(19), followed by heavy equipment acquisition (15), SWM projects (14), and public
markets (11). In terms of loan amounts, the IT park project of one 1st class province
accounts for over PhP 1 billion or 30% of the PhP 3.6 billion total. SWM projects
amounted to PhP 885 million (25%), heavy equipment to PhP 580 million (16%), and
water systems to PhP 447 million (12%).
D.
LGU Access to ODA
Despite the concessionary terms these resources carry,, LGUs have not been
able to avail of ODA loans and grants. As of 2006, national government agencies
had the biggest share of the ODA pie at 65%, followed by government-owned and
controlled corporations (GOCCs) and government financing institutions (GFIs) which
got 22% and 13%, respectively. LGUs received less than one percent (1%).
27
E.
Factors Hindering LGU Access to ODA
Three main factors contribute to the LGUs' lack of access to ODA. One is the
requirement imposed by international lending institutions that the national
government issues a sovereign guarantee on LGU loans. However, the Foreign
Borrowings Act (RA. 4860) states that the guarantee of the Philippine Government
could be issued only for loans granted to GOCCs and GFIs. There is nothing in the
provisions of the law that says that a guarantee could be provided to external
borrowings of LGUs, which is why the official legal opinion is that such a guarantee is
not allowed.
1.
The selection process for LGUs participating in ODA loan

projects
Despite the dwindling of ODA resources, stories abound in the mass media of
successful implementation of various projects involving LGUs, usually funded by
bilateral aid agencies. This is mainly the result of efforts by both donors and
beneficiary LGUs to gain visibility and project a positive image for themselves.
Because of this need to gain visibility, bilateral aid agencies tend to prefer that their
projects be implemented in areas where they may have had some previous
exposure, especially in areas where previous successes had been achieved.
Moreover, they look for the following in the LGUs they prefer as venues for their
projects:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Dynamic leadership of the local chief executive;

Unitity in vision and ability to gain consensus;
Clear development goals;
Competence of staff involved in project development and
implementation, especially the Provincial Planning and
Development Officer (PPDO);
Good information to support decision making and funding
applications;
Proactive effort in attracting ODA;
Counterpart support that anticipates needs to make the
partnership work, including a specific allocation of counterpart
funds;
Active effort in coordinating projects at all levels;
Active seeking of ways to develop public-private sector
partnerships; and
Policy environment that encourages building on initiatives of
previous administrations.
These stringent criteria severely limits LGU access to ODA projects and
creates the situation of donor agencies converging on the few LGUs that qualify, thus
resulting in wasteful duplication of efforts.
Most of the bilateral grant projects are small and thus limited initially to a few
LGUs so that they could be more focused. Their project design often involves some
innovation in local development that, if proven to be successful, may be graduated or
scaled up to the national level, usually by the national government on its own, or with
28
assistance from multilateral institutions such as the World Bank and the Asian
Development Bank.
Precisely because donor agencies want to have success stories to tell, many
ODA grant projects at the LGU level tend to be coddled or cared for by both the
donor and the recipient LGU to increase the chances of the projects being
successful. However, when replicated in other LGUs during the scaling up and
implementation in a larger area, the projects actual performance falls short of the
level of success achieved in the pilot LGUs. There is even the prior problem of
finding enough LGUs to participate in the scaling up. In scaled up projects,
participating LGUs are expected to put up most of the resources (in cash or in kind,
as equity or as loan) that were given by the donor partner to the pilot LGUs.
2.
The prohibition on the NG from providing sovereign guarantee to

LGU-contracted ODA loans
International lending institutions require that the national government issues a

sovereign guarantee on LGU loans. However, the Foreign Borrowings Act (RA.
4860) states that the guarantee of the Philippine Government could be issued only
for loans granted to GOCCs and GFIs. It has no provision either for foreign
borrowings of local governments or for the issuance of a guarantee from the
President, on behalf of the Philippine government, for such loans.
3. The absence of a generally-accepted mechanism for the transfer of
ODA loan funds from the NG to LGUs
Funds for the transfer of ODA loan funds from NG agencies to LGUs are
available, but no mechanism for doing so is acceptable to both MDFO and DBM.
These two agencies have not agreed on the how much the equity contribution would
be from participating LGUs. A number of equity sharing schemes therefore exists
across projects involving ODA loan funds.
4.
Occasional cash flow problems of the NG
Cash flow problems experienced by the national government delays the

transfer of ODA loan funds to LGUs.
5.
Inability of LGUs to provide counterpart financing
LGUs are generally unable to put up the equity required for an ODA loan. A
number of LGUs have withdrawn participation in such projects due to the NG-LGU
cost sharing scheme for LGU-devolved programs.
6.
Lack of technical capacity among LGUs to participate in ODA

projects
The limited technical capacity of LGUs has likewise affected LGU access to
ODA. Some LGUs have had difficulties in complying with pre-qualification
requirements, documentary requirements for clearances, and the need for detailed
engineering designs. One of these requirements is the Bureau of Local Government
Finance (BLGF) good debt service capability certification, which is needed to avail of
MDFO financing facilities.
29
7.
The tedious and lengthy processes and procedures for availing

of ODA loans through the MDFO
Compared to those imposed by other GFIs and private banks, the processes and
procedures imposed by the MDFO on LGUs for availing of ODA loans are tedious
and lengthy and thus have served either as a hindrance to the easy and fast access
of LGUs to ODA loans or as a disincentives for LGUs to seek ODA loans. The
MDFO also imposes high interest rates, primarily because of some built-in technical
assistance and capacity building for recipient LGUs.
F.
Recommendations
The following measures are recommended to increase LGU access to

private sources of funds which should lessen the dependence of LGUs on ODA
and, more importantly, develop a sustainable LGU financing system:
1.
Government should review its policy of encouraging private

funding of creditworthy LGU projects.
The ODA Act provides that ODA must be used where there are no
comparative financial instruments available. Using domestic commercial financing
would free ODA for priority sectors fo which commercial financing is not available. It
also introduces new fund sources and instruments and thus help develop sustainable
financing of LGUs.
2.
LGUs should be allowed to use private commercial banks as

depository institutions.
Once the prohibition against LGUs using commercial banks as depositories is

lifted, LGUs will be able to develop a closer working relationship with private
commercial banks, which will compete for LGU business by way of offering higher
interest on deposits, lower interest on loans, and better banking services in general.
For many areas in the countryside, the LGU has been the single biggest potential
banking client. With the opening of access to LGU accounts, more private banks will
establish branches in the regions.
3.
BLGF, DILG, AND LGUs should strengthen the dissemination of

information on LGUs creditworthiness.
Initiatives toward this goal include harmonizing financial reporting systems,

more specifically the electronic linkage among the Local Government Performance
Monitoring System, the Local Government Financial Performance Monitoring
System, and the creditworthiness rating system developed under ADB TA 4556.
Once adopted, the latter can provide additional relevant information to prospective
lenders as well as to assist the BLGF and bank regulators in ensuring that bank
lenders and LGU borrowers are engaging in prudent and responsible lending and
borrowing practices, respectively.
4.
Support should be given to MDFO to pursue initiatives for

mobilizing private capital for LGU projects and to strengthen its
operational capacity to support LGU financing.
The MDFO may consider tapping long-term domestic capital by securitizing

its loan portfolio or issuing a pooled bond on behalf of selected LGUs. Both loan
30
portfolio and pooled bond could be secured by, among other credit enhancements, a
reserve fund using its Second Generation Fund. In the meantime, the government
should strengthen MDFOs operational capacity to support LGU financing by
approving the latters organizational rationalization plan as an attached agency of the
DOF.
5.
Government needs to ire-invigorate the LGU bond market.
After an initial round of bond flotations, the LGU bond market is now inactive.
The primary reason is cost. Most LGU borrowings are small and the high fixed cost
of issuing bonds means that it is cheaper to obtain a bank loan. The government
could look into modalities such as bond pooling and establishing a liquidity facility to
help bolster interest in LGU bonds.
6.
Government needs to acquaint LGUs of sources of local public

investment funds other than direct ODA grants.
These sources include the Priority Development Assistance Fund (PDAF) as

well as the programs, activities and projects of NG line agencies.
The following measures, meanwhile, are being recommended to make the
use of ODA resources more efficient and, thus, effective
1.
The government and its ODA partners should design projects

and programs that would leverage ODA funds for LGUs with
domestic commercial financing. It should also ensure that
commercial financing is not crowded out.
Much of the ODA for LGUs is channeled through GFIs and other government
financing institutions which act as intermediaries and on-lend these funds to eligible
LGUs. However, ODA and GFI funds are not enough to meet the potential demand
from LGUs. Private financial institutions and other forms of private capital can help to
meet additional LGU needs. IFIs should therefore be given a relevant role in the
design of projects that use ODA to bring in more domestic players and financing
instruments.
2.
The pricing and terms of ODA funds channeled through GFIs

must be reviewed and a more transparent system needs to be
adopted for determining who should benefit from the low cost
and longer terms of ODA loans.
There is currently no policy on the final terms for the way GFIs receive ODA
funds, with each ODA source providing funds to GFIs under different terms and
conditions. The current practice is for the GFI to retain the benefits of the low cost
and longer terms of the ODA. This system lacks transparency in the allocation of the
benefits of the loans. When the GFIs on-lend the ODA-sourced funds to LGUs at
market prices, this can result in a substantial profit for the GFIs. It is necessary for
GFIs and other government lending institutions to differentiate their use of ODA from
the use of their internal funds to minimize the possibility of ODA crowding out PFI
lending to LGUs and other sub-national entities like water districts.
31
3.
The possibility of allowing LGUs to directly access ODA without

any sovereign guarantee by the national government should be
explored.
This used to be a moot issue before, when practically all donor partners,
multilateral and bilateral, refused to lend without sovereign guarantee. Lately,
however, ADB has been open to relaxing this condition.
4.
Government must fast-track the implementation of Executive

Order 809.
The administrative fiat directs the DILG and the DOF to implement the LGU
Financing Framework, under which first-tier LGUs, or those provinces, cities, and
municipalities whose average regular and locally-source funds for the past three
years comprise 60% of their total income, may borrow directly from multilateral
agencies ". . .without any direct or indirect National Government guarantee.
Although borrowing without any national government guarantee may add on some
1.5 percentage points to the cost of funds to the LGU as this is the current charge of
the LGU Guarantee Corporation, the LGUs are nevertheless expected to enjoy a
lower cost of funds if they are able to borrow directly from ODA sources. Moreover
and perhaps more importantly, LGUs would be able to define its own public
investment needs and priorities, without these being distorted by national priorities,
which happens when they access ODA funds through relending from NG agencies.
5.
The implementation of a performance-based grant system must

be a priority.
There is a need to evaluate the NG-LGU cost sharing policy, harmonize it

with other grant programs, pilot-test the performance-based incentive policy, and
finalize the design of the performance-based grant system.
6.
Government needs to develop the LGUs' capacity to prepare and

operate projects that would be suitable for ODA and commercial
financing.
Managers of financial institutions say that there are funds available to meet
the capital financing needs of LGUs. They believe that the constraint is the lack of
well-prepared project proposals. Many LGUs do not have a system of setting
priorities for capital investment and the capacity and/or resources to prepare project
feasibility studies. In some cases, LGUs are not too familiar with the process of
accessing ODA. Government needs to strengthen its efforts to educate LGUs on
how to access ODA. It may also wish to consider the establishment of a project
feasibility study fund and a ready pool of consultants for the use of LGUs to conduct
feasibility studies. It may likewise consider streamlining the development and
approval processes for small subprojects so that templates can be used for small
subloans, e.g., P3 million and below, instead of full-blown feasibility studies.
7.
There is a need to use ODA more strategically and effectively.
Government could make its development strategies and priorities clearer to

ODA providers. It may want to indicate where its own resources are going and
where and in what form ODA is most needed to complement domestic resources. It
could guide its ODA partners in how they can best help, including specifying which
regions, provinces, or sectors should be given priority. In terms of mobilization of
financial resources, ODA for LGUs could be used to pilot-test and catalyze
32
sustainable mechanisms for local government access to domestic capital and should
not be focused only on short-term transfer of ODA through projects where ODA is
simply on-lent to LGUs on a one-to-one basis or goes directly into projects. The
levels of concessionality of ODA could be considered more carefully at the
programming stage so that the more concessional ODA can be directed towards the
sectors and locations that need it more. Government could also exert best efforts to
ensure that all programmed or committed funds are negotiated and converted into
loan agreements.
VI.
Mobilizing Internal and External Resources through the Exercise

of LGU Corporate Powers
Exercising their corporate powers would allow LGUs to access and
mobilize the resources of the private sector and, in instances when
this is warranted, use these resources in combination with their own to
engage in enterprises that would be of benefit to the community.
A.
LGU Corporate Powers

Having corporate powers means that LGUs can:
1.
2.
3.
4.
5.
6.
have continuous succession in its corporate name;

sue and be sued;
have and use a corporate seal;
acquire and convey real or personal property;
enter into contracts; and
exercise such other powers as are granted to corporations, subject to
the limitations provided in the Code and other laws.
More specifically, they can, among other powers:

1.
create their own sources of revenues; acquire, develop, lease,

encumber, alienate or otherwise dispose of real or personal property
held by them in their proprietary capacity; and to apply their resources
and assets for productive, developmental or welfare purposes in the
exercise of their governmental or proprietary powers and functions;
2.
negotiate and secure grants to support basic services and community

facilities;
3.
borrow from financial markets, through loans, credits and other forms
of indebtedness, in advance of revenues;
4.
acquire property, plant, machinery equipment and such necessary

accessories through a suppliers credit, deferred payment plan, or
other financial scheme;
5.
issue bonds, debentures, securities, collateral notes and other

obligations to finance self-liquidating, income-producing development
or livelihood projects pursuant to the priorities established in the
approved local development plan;
6.
extend loans, grants, or subsidies to other local government units;
33
B.
7.
enter into contracts with any duly pre-qualified individual or contractor

for the financing, construction, operation and maintenance of
financially viable infrastructure facilities under the Build-OperateTransfer (BOT) agreement, subject to the applicable provisions of
Republic Act 6957 as amended by Republic Act 7718; and
8.
enter into joint ventures and other cooperative arrangements with nongovernmental organization (NGOs) and Peoples Organization (POs)
for social and economic purposes.
Manifestations of LGU Corporate Powers
The most concrete and visible signs of the LGUs' exercise of their corporate
powers are their efforts to mobilize resources. LGUs do this by operating local
economic enterprises (LEEs), which are the subject of a separate section, and by
engaging in non-traditional forms of resource mobilization. The non-traditional forms
of resource mobilization are private-private partnership (PPP), inter-LGU cooperation
schemes, and corporatizing service facilities.
1.
Public-Private Partnerships
Public-private partnerships (PPPs) are collaborative efforts of government

and the private sector to deliver services and/or engage in enterprises. Among the
PPP arrangements that are slowly becoming popular among LGUs in the country are
the "Build-Operate-Transfer" (BOT) and "Build and Transfer (BT) schemes, and
partnerships with community organizations.
There are significant advantages in LGUs allowing the private sector to
participate in the delivery of government services. The following are the most
important:
a.
It enables the LGUs to implement priority projects without having to

raise the funds for their implementation.
b.
It frees LGU funds for other priority development projects which may
not be eligible for credit financing, e.g., social and environmental
projects.
c.
It allows flexible financing and private sector partnership in local

development.
d.
It provides access to superior technology transfer and training.
e.
It enables LGU to own the infrastructure facility after a fixed term.
f.
It hastens project implementation and assures operating efficiency.
g.
It provides potential source of funds if a revenue sharing scheme is

built into the BOT contract.
There are seven possible arrangements for PPPs that could be used by
LGUs. These are (a) service contract, (b) management contract, (c) lease, (d)
concession, (e) license, (f) funding agreement, and (g) joint venure. These models
34
differ in the following areas: (a) ownership of the assets, (b) responsibility for capital
investment, (c) responsibility for operation and maintenance, (d) relationship to the
consumer/citizens, (e) regulation of user charges or tariffs, (6) receipt of operating
revenue, (f) sharing of financial risks, (g) degree of LGU subsidy, and (h) extent of
monopoly rights.
a.
Service Contracts
The LGU may contract an external organization to deliver a service. The LGU
continues to own the assets needed to deliver the service but the service contractor
is responsible for the repair and maintenance of these assets and usually for the
replacement of some equipment necessary for the delivery of the service. The
operating income is controlled by the LGU and goes to its accounts. The contractor is
simply paid for the service based on the agreed price.
b.
Management Contracts
Management contracts provide for the LGU to either share or not share with
the service provider the income from the service delivery. If there is no sharing of
income, the LGU maintains ownership of the assets and is responsible for
investments into the assets. It also sets the tariffs for the service, is directly
responsible to the citizen for the service, and assumes all financial risks. The
operation and maintenance costs are met from the income received for the service.
Any operating surplus or deficit is the responsibility of the LGU. The service
contractor, on the other hand, is simply paid a fixed fee for the service.
If the revenue received from the delivery of the service is shared between the
LGU and service contractor, the LGU has the same responsibilities and risks as in
the no-income-sharing approach. However, the service contractor usually has
discretion to charge less (but not more) than the regulated tariffs. It also receives a
fixed percentage share of the operating surplus on top of the fixed contract fee.
c.
Leasing
The LGU may lease some of the assets it owns to a service provider in
exchange for a rental price which may be a straight rental price, a percentage share
of the revenue, or both. The service provider is responsible to the consumers of the
service and thus bears all the financial risks associated with the operation of the
service. It collects the revenue from the delivery of the service through tariffs which
the LGU may set. It also meets the operating costs. It is likewise responsible for
operation, repair and maintenance, and for the replacement of short-life equipment.
It must return the assets to the LGU in good condition at the end of the lease period,
less normal wear and tear on equipment.
d.
Concessions
In a concession, a service contractor is given by the LGU the exclusive right

to provide a service for a fixed period of time. It has to invest in constructing and
providing the necessary infrastructure and is responsible for all costs, including
capital, repair, operation and maintenance. It is also responsible to the consumers of
the service and thus bears all the financial risks. The LGU, meantime, sets the levels
of quality and/or quantity of the service to be provided by the service contractor, and
may fix or negotiate with the service provider the charges the latter collects for the
service. The charges are usually indexed to inflation or some level of return on
35
investment. The LGU get back ownership of the assets after the concession period.
A Build-Operate-Transfer (BOT) scheme is a form of concession.
e.
Licensing
A service provider may be licensed to invest in, and operate, a service on the
same conditions as a concession, except that it does not have the exclusive rights to
provide the service. It, however, retains the assets used in the delivery of the service,
after the license has expired. This arrangement is resorted to where there is
potential for competition and the service requires lower investment costs.
f.
Funding Agreement
LGUs may enter into a contract with non-profit organizations under which the
former provides the latter a grant to provide certain services, such as the
management of social, sports, recreation, or cultural activities. The organization is
responsible for all investment and operating costs, owns the assets used and bears
the financial risks.
g.
Joint Ventures
Another mode of public-private partnership is the Joint Venture (JV), which is

a contractual arrangement whereby a private sector entity or a group of private sector
entities and, in this particular case, an LGU contribute money/capital, services, and
assets while sharing risks to jointly undertake an enterprise. The JV may either be a
contractual JV, or a corporate JV. A JV company is an entity registered with the
Securities and Exchange Commission (SEC) by the JV partners that shall perform
the primary functions and obligations of the JV as stipulated in the JV Agreement.
Meanwhile, a contractual JV is a legal and binding agreement under which the JV
partners shall perform the primary functions and obligations under the JV Agreement
without forming a JV Company.
Because there are legal impediments for LGUs to establish private
corporations, it is recommended that JVs with the private sector be in the form of
contractual Joint Venture, adopting applicable provisions of Executive Order (E0) No.
423 dated 30 April 2005.
2.
Inter-LGU Cooperation Schemes
Inter-LGU cooperation schemes involve two or more LGUs engaged in

collaborative efforts in planning and implementing projects and programs, and in
service delivery. These schemes allow participating LGUs to take advantage of
synergies in resources and capacities that cooperation among them create.
3.
Corporatizing Service Facility
A number of LGUs (e.g., Misamis Oriental and Quezon City) have attempted
to operate their LEEs by registering their LEEs as corporations with the Securities
and Exchange Commission (SEC) under the Corporation Code. However, the
Department of Interior and Local Government (DILG), in an opinion dated July 22,
1997, asserts that an LGU, being a juridical person by virtue of it being a corporation
itself, cannot be an incorporator of a private corporation. This opinion is based on the
fact that Section 10 of the Corporation Code provides that: Any number of natural
persons not less than five but more than fifteen, all of legal age x x x may form a
private corporation for any lawful purpose or purposes x x x.
36
Meanwhile, the COA points out that government corporations can only be
created by Congress (Sec. 16 Art. XII of the Philippine Constitution). It also says that
the LGC does not vest in the Sangguniang Bayan the power to create corporations
(Supreme Court in Engr. Ranulfo Feliciano, Leyte Metropolitan Water District vs.
COA, GR No. 147402, dated January 14, 2004).
In the face of these difficulties, LGUs seeking to create corporations out of
LEEs ought to seek legislation which provide such corporations a separate charter as
a government-owned and controlled corporation..
C.
Enhancing the Corporate Capacities of LGUs
Efforts to harness and enhance the corporate capacities of LGUs requires the
dynamic interplay of policy support, capacity building, and sustaining actions
consisting of advocacy and technical assistance, monitoring and evaluation, as well
as funding support. It also needs to have an institutional framework for the
mobilization of stakeholder support.
1.
Policy Support
There are external factors that impact on LGUs exercise of corporate powers,
mainly related to policy and oversight support. There are a number of laws and
policies governing the LGUs exercise of corporate powers that are vague on LGUs
mandate to establish LEEs. Moreover, policies on organizational and financial
systems for LEEs are not in tune with industry standards. The policies on LGUs
exercise of corporate powers must be responsive to LGU needs and more enabling
of LGU initiatives. Furthermore, policies suffer from gaps in their interpretation and
implementation at the operational/local level. All these needs must be addressed in
order for a policy environment that supports the promotion of the exercise of LGU
corporate powers is to be created.
2.
Capacity Building
Capacity building has three inter-related dimensions:

a) institutional
interrelations; b) organizational capacities; and c) individual competencies. However,
attempts at rationalizing or strengthening institutional interrelations and
organizational capacities are often viewed as threatening and thus resisted. In
contrast, training in individual competencies is generally viewed as non-threatening
and is thus often supported. In any case, training in identifying investment and
economic potentials and potential economic niches, in entrepreneurship and
enterprise management, business planning, management skills, financial
management and risk management, among others, can be used as an entry point
for pursuing the other dimensions of capacity building. The LGA should be allowed
to play a vital role in the training of individual personnel of LGUs, as well as in the
strengthening of institutional reorganization and the strengthening of organizational
capacities.
3.
Sustaining Actions: Advocacy and Technical Assistance
The successful exercise of LGU corporate powers would require not only the
necessary policy support but also sustained advocacy and adequate technical and
funding assistance. LGUs would need some assistance in identifying and then
accessing sources of investment. The OPDS can take the lead, in collaboration with
the DILGs Regional Offices, DTI, and the Small and Medium Enterprise
37
Development (SMED) Council, in promoting LGUs exercise of corporate powers and
in providing them the necessary technical assistance in identifying its economic
potentials, potential economic niches, needs and demands, and in managing LEEs.
These entities can likewise act as broker for LGUs in sourcing financing for its
projects and initiatives in line with LGUs exercise of corporate powers.
4.
Sustaining Actions: Monitoring and Evaluation
In collaboration with the DILG Regional Directors and Local Government

Officers, the BLGS shall have overall responsibility for collecting data and monitoring
results. It shall, in collaboration with the concerned DILG and local officials, establish
the baseline data needed for the continuing monitoring and evaluation of the LGUs'
performance of their corporate powers. This monitoring and evaluation exercise
could be part of DILGs LGPMS and its results will be incorporated into the DILGs
overall management information system, and shall be used to implement the
performance-based grant on LGUs exercise of corporate powers. Community
monitoring tools could also be developed by DILG to be actively used by accredited
civil society organizations and private sector organizations to promote better
governance and transparency in project activities.
5.
Sustaining Actions: Funding Support
A fund, to be called the LGU Corporate Powers Challenge Fund (LCPCF), is

proposed to provide financial support for innovative instances of the exercise of
corporate powers by LGUs. It is proposed to be capitalized with P300M from
budgetary appropriation to be sourced by DILG and is to be established as a window
in the Municipal Development Fund Office (MDFO). Ten percent of this fund is to be
spent on capacity building while the rest would be given as grants to LGUs to
promote their exercise of their corporate powers.
Other sources of funding support include the following:
a.
b.
c.
d.
6.
The Local Economic Development Project funded by the Canadian

International Development Agency (CIDA) to support LGU capacity
building for the next eight years;
The Spanish Grant intended for Regions 5 and 13 to support capacity
building on resource mobilization, financial management and
economic enterprise management;
The forthcoming Philippine Basic Urban Services Sector Project
funded by the Asian Development Bank; and
The Municipal Development Fund particularly the PROLEND
Program, a program lending window designed to promote and support
policy reforms in local governance.
Institutional Framework
To set the stage and create a platform for LGUs effective exercise of
corporate powers, an institutional framework is hereby envisioned where the DILG, in
collaboration with the other oversight agencies and concerned institutions such as
NEDA, DOF, DBM, DTI, DA, DOJ, ULAP and PCCI, shall establish a Coordinating
Council for LGU Corporate Powers (CCLCP). The CCLCP shall:
a.
be created through an Executive Order;
38
b.
c.
d.
e.
f.
formulate policies and provide guidance on LGUs exercise of

corporate powers;
serve as the clearinghouse of policies and implementing rules and
regulations as regards LGUs exercise of corporate powers;
act as a collegial body to review, approve or disapprove applications
of LGUs to LCPCF;
review and amend LCPCF policy guidelines after a prescribed period
of operation; and
be assisted by a core support group composed of representatives
from OPDS, BLGD, BLGS and LGA which shall serve as its
secretariat.
As members of the CCLCP Secretariat, the different bureaus and offices of

the DILG can provide the policy and promotional support for the program. The Office
of Project Development Services (OPDS), as DILGs conduit with multilateral and
bilateral institutions, can take the lead in the promotional and advocacy initiatives in
LGUs' exercise of corporate powers. It can also assist LGUs in packaging programs
and projects and in funneling funding support along these initiatives. The Bureau of
Local Government Development (BLGD) can be the focal office in policy review,
policy consultation and policy formulation, with respect to LGUs corporate powers.
The Local Government Academy (LGA), in collaboration with other institutions, on
the other hand, can take the lead in institutional capacity building initiatives to
enhance LGUs exercise of corporate powers. The Bureau of Local Government
Supervision (BLGS) can provide the framework for effective monitoring and
evaluation of LGUs initiatives in the exercise of corporate powers.
COORDINATINGCOMMITTEE
ONDECENTRALIZATION(CCD)
RaymundC.Fabre
ADBTA7019
Contents
1.
2.
3.
4.
5.
History
HighlightsoftheMOU:LegalBasis
HighlightsoftheMOU:Purpose
HighlightsoftheMOU:Structure
HighlightsoftheMOU:Scope
HISTORY
y TheconceptofacoordinatingbodyforLGUand
decentralizationissueswithmembersfromthe
oversightagenciesisnotnew.
y Aninformalversionofthisbodywasresponsible
foreventuallydraftingandfacilitatingthe
issuanceofJointMemorandumAgreement20071.
y However,therewasalwaystheintenttoformalize
thebodyand,originally,tobecomearevivalof
theOversightCommitteeonDevolution.
HISTORY
y However,basedonarecentquicklegalreview,
theOCDwasneverdissolvednordidtheLocal
GovernmentCodeof1991provideforasunset
clause.
y TheOCDcontinuedtobeconvenedafterthe
issuanceoftheCodesIRRbutonlytoruleon
issuessuchasthemanneronhowtheIRAistobe
released.
y However,thereanumberofcoordinationand
policyissuesasidefromtheIRAwhichshouldbe
addressedbyaregularlyconvenedinteragency
body.
HISTORY
y Theseissuesincludedreformsonthelocaltaxing
powersofLGUs,LGUaccesstoofficial
developmentassistance,LGUaccesstocredit,the
implementationofJMC20071orharmonization
intheprovisionofcapacitybuildingtoLGUs,and
thegovernmentspositionsonthePhilippine
DevelopmentForum20092010workplan.
y Overtimethiscoalitionbecomecomfortablein
workingtogethertowardsaddressingtheseissues
andseekingreforms.
HISTORY
y InameetingheldlastJune22,2009,thegroup
agreedtoformalizetheirrelationshipthrougha
memorandumofagreement(MOU)whichwould
includethefouroversightagencies,theLGU
LeaguesandtheUnionofLocalAuthoritiesofthe
Philippinesassignatories.
y Afterseveralconsultations,thefinalformofthe
MOUwascirculatedamongtheCCDmembersfor
finalapprovalonOctober16,2009.
AGENCY
LEGALBASIS
DepartmentoftheInteriorandLocal
Government(DILG)
Section3(3),Chapter1,TitleXIIofExecutive
Order292(AdministrativeCodeof1987);
Section533ofRA7160(LocalGovernment
Codeof1991)
NationalEconomicandDevelopment
Authority(NEDA)
ExecutiveOrder230,s.1987;Section114(b)
ofRA7160(LocalGovernmentCodeof1991)
DepartmentofBudgetandManagement
(DBM)
Section2,Chapter1,TitleXVIIofExecutive
Section354andSection533ofRA7160
(LocalGovernmentCodeof1991)
DepartmentofFinance(DOF)
Section1,Chapter1,TitleIIofExecutive
Section288andSection533ofRA7160
(LocalGovernmentCodeof1991)
AGENCY
LEGALBASIS
LeagueofProvincesofthePhilippines(LPP)
Title6,Chapter1,ArticleFourandSection
533ofRA7160(LocalGovernmentCodeof
1991)
LeagueofCitiesofthePhilippines(LCP)
Title6,Chapter1,ArticleThreeandSection
114(b)ofRA7160(LocalGovernmentCode
of1991)
LeagueofMunicipalitiesofthePilippines
(LMP)
Title6,Chapter1,ArticleTwoandSection
1991)
LigalngmgaBarangay(LnB)
Title6,Chapter1,ArticleOneandSection
1991)
UnionofLocalAuthoritiesofthe
Philippines(ULAP)
SECRegistrationA199900861
LegalBasis
AGENCY
LEGALBASIS
Departmentofthe
InteriorandLocal
Government(DILG)
establishandprescriberules,regulationsandotherissuances
andimplementinglawsonthegeneralsupervisionofLGUs,
promotionoflocalautonomyandmonitorcompliance
NationalEconomicand
DevelopmentAuthority
(NEDA)
responsibleforcoordinatingtheformulationofcontinuingand
integratedsocioeconomicdevelopmentplans,policies,and
programs
DepartmentofBudget
andManagement(DBM)
promulgateaBudgetOperationManualforLGUstoimprove
andsystematizebudgetpreparation,authorization,execution
andaccountability
DepartmentofFinance
(DOF)
formulate,institutionalize,andadministerfiscalpoliciesand
forsupervisionofrevenueoperationsofallLGUswiththe
objectiveofmakingtheseentitieslessdependentfromthe
nationalgovernment
LegalBasis
AGENCY
LEGALBASIS
LeagueofProvincesof
ventilate,articulateandcrystallizeissuesaffectingtheir
thePhilippines(LPP),
respectiveLGU,andsecuringthroughpropermeanssolutions
LeagueofCitiesofthe
thereto
Philippines(LCP),
LeagueofMunicipalities
ofthePilippines(LMP),
andLigangmga
Barangay(LnB)
UnionofLocal
Authoritiesofthe
Philippines(ULAP)
strengthentheorganizationandpromotefellowshipand
unityamonglocalauthorities
1.
2.
3.
Toactasanintergovernmentalbodyfor
coordinatingandharmonizingpoliciesand
operationalactivitiesrelatedtodecentralization
anddevolution.
ToactasaforumfordiscussingLGUissuesand
policiesandforsharingrelevantinformation.
Tocollectivelyformulate,implementand
advocatesolutionsandpolicyreformswithin
thepowersandauthorityofthemember
agencies.
4.
5.
6.
Toexploreconsensusandbuildsupportfor
policyreformsrelatedtoimprovinglocal
governance,localservicedeliveryand
devolution.
Toelevateissuesandrecommendationstothe
OCDandotherappropriateagencies,bodies
andboardsforpolicydecisionandaction;and.
ToinitiatestudiesonLGUissuesforthe
purposeofidentifying,formulating,
implementingandadvocatingpolicyreforms.
PurposeoftheCCD
DILG
harmonizedpoliciesand
operationalactivities
DOF
DBM
policyreformsonlocal
governance,localservice
deliveryanddevolution
NEDA
ULAP
LnB
policyissuesand
recommendations
totheOCD
LMP
LCP
LPP
CoordinatingCommittee
onDecentralization
studiesonLGU
issues
1.
2.
TheCCDiscomposedofthreemain
components:anExecutiveCommittee
(Execom),aPolicyDialogueGroup,anda
TechnicalSecretariat.
TheExecutiveCommitteeiscomposedofthe
UndersecretariesoftheDepartmentofInterior
andLocalGovernment(DILG),theDepartment
ofFinance(DOF),theDepartmentofBudget
andManagement(DBM),andtheNational
EconomicandDevelopmentAuthority(NEDA).
TheChairmanoftheExecomwillbetheDILG
Undersecretary.
3.
4.
ThePolicyDialogueGroupiscomposedofthe
UndersecretaryoftheDILGasChairman,the
OversightAgencyTechnicalWorkingGroupand
theLocalGovernmentDialoguePartners.
TheOversightAgencyTechnicalWorkingGroupis
composedoftheDirectoroftheBureauofLocal
GovernmentDevelopment(BLGD)oftheDILG,the
ExecutiveDirectoroftheBureauofLocal
GovernmentFinanceoftheDOF,theDirectorof
BudgetandManagementBureauGoftheDBM,
andtheDirectoroftheRegionalDevelopment
CoordinationStaff(RDCS)ofNEDA.
5.
TheLocalGovernmentDialoguePartnersare
composedofExecutiveDirectorsoftheLeague
ofProvincesofthePhilippines(LPP),the
LeagueofCitiesofthePhilippines(LCP),the
LeagueofMunicipalitiesofthePhilippines
(LMP),LigangmgaBarangay(LnB),andthe
UnionofLocalAuthoritiesofthePhilippines
(ULAP).
6.
TheCCDTechnicalSecretariatistheBureauof
LocalGovernmentDevelopment(BLGD)ofthe
DILGwiththeBLGDDirectorservingas
ExecutiveSecretaryonanexofficiobasis.
CCDStructure
EXECUTIVECOMMITTEE
Undersecretariesof
DILG,DOF,DBMandNEDA
POLICYDIALOGUEGROUP
OversightAgencyTWG:
BLGD ILG,DBMROCS(DBM
G),DOFBLGF,NEDARDCS
LGDIALOGUEPARTNERS:
LPP.LCP.LMP.LnB,and
ULAP
TECHNICALSECRETARIAT
BLGDDILG
Scope
1.
2.
3.
4.
5.
6.
7.
CapacityBuilding
LocalServiceDelivery
PerformanceMeasurement
DevolutionReforms
ExpenditureandBudgetPolicy
LocalGovernmentFinance(CreditandNon
Traditional)
LocalGovernmentFiscalPolicy
(IntergovernmentalTransfers,DonorGrants
andOwnSourceRevenues)
THANKYOU
Decentralization Policy Notes

Francisco A. Magno
Introduction
The Local Government Code was passed in 1991 with the goal of improving the delivery of
frontline services to citizens and communities through the decentralization of powers from the
nation-state to local governments in the Philippines. This study will examine the opportunities
and challenges in further decentralizing environmental, health, social welfare, and agricultural
services to sub-national units of governance. It will consider the new roles to be played by the
central government and local governments in the context of efforts to redraw governance borders
and deepen the decentralization process. In this regard, the key question is why further
decentralization is needed despite the transfer of significant authority to local governments for
the past 18 years.
Decentralization is not an end but a process leading to good governance. Structural and policy
reforms implemented towards decentralization are manifested through four major types
(political, administrative, market, and fiscal) and changes have resulted in terms of
improvements in local governance, delivery of services, allocation of fiscal resources, and
promoting public participation (Brillantes and Cuachon 2002). Domestic and international
pressures for democratization have led to a new emphasis on forms of governance below the
nation-state level (Angeles and Magno 2004).
A concern with local government capacity does suggest that there are two directions in which the
reform of this sector can proceed. On the one hand, it can proceed in a minimalist direction as
the reformers seek to close a capacity gap by limiting local authorities to their core business
functions and constraining their ability to undertake these functions in a fiscally irresponsible
way. On the other hand, it may be recognized that the application of avant-garde management
principles and financial disciplines at the local level may enable councils to play a more catalytic
role in the economic and social development of their communities. A more activist approach to
local government reform may seek to build on these developments to enhance the capacity and
discretion of local authorities to take on more functions, engage community participation to a
greater degree in their decision making and play a more significant role in the delivery of the
central governments domestic policy agenda (Dollery and Wallis 2001).
Elected local government is but one element of what has become known as local governance, a
term which seeks to capture the shift away from a system in which local authorities were the key
actors in their localities to one where decision-making authority and service provision is shared
among a range of agencies. Local authorities are increasingly working alongside other public,
private and voluntary sector organizations in providing services for a locality (Pratchett and
Wilson 1996).
Appropriate governance is essential to implementing agreed-on goals and to facilitating and

institutionalizing new norms of practice and performance both key elements in meaningful
reform. Altering incentives through formal structures will improve performance only if the
changes are made in a way designed to affect how informal authority influences the behavior of
subordinate managers and primary workers. To improve program performance or to change core
organizational practices, it may be necessary to make changes in governance within a
comprehensive framework designed to change core values and commitments (Lynn, Heinrich
and Hill 2000).
Decentralization, as mandated by RA 7160 or the Local Government Code of 1991 (LGC)
involves the transfer of both responsibility and resources for several functional areas from
national government agencies to local government units. Eighteen years after its implementation,
complete devolution of identified responsibilities has not yet been accomplished due to various
reasons. These policy notes will cover the devolution of four sectors namely environment and
natural resources, health, social welfare and development, and agriculture. The outcomes of
devolution in these areas have been culled from various studies and literature on decentralization.
Finally, suggestions and recommendations were consolidated.
Environment
In a devolved setting, the Department of Environment and Natural Resources (DENR) shall
prescribe the conditions of environment and natural resources that shall obtain in the jurisdiction
of all LGUs in the country. They are tasked to set the methods and procedures for ensuring good
governance of environment and natural resources, including technical processes that need to be
observed. DENR shall recommend the processes for how LGUs might develop a program of
action to achieve prescribed conditions of their environment. Moreover, they are assigned to
monitor LGU performance and compliance to national policies and standards and to how they
conduct the prescribed methods and procedures for governing environmental amenities and
natural resources.
LGUs on the other hand had been assigned to perform functions various devolved from the
DENR. Under the Local Government Code, provinces are authorized to enforce forestry laws
limited to community-based projects, pollution control law, small-scale mining law, and other
laws on the protection of the environment. Provincial governments can establish mini
hydroelectric projects for local purposes. On the other hand, municipalities are tasked to
implement community-based forestry projects which include integrated social forestry, programs
and similar projects. They are also mandated form environmental managements systems and
solid waste disposal and can manage and control communal forests with an area not exceeding
50 square kilometers; and to establish tree parks, greenbelts, and similar forest development
projects. The barangays are expected to provide services and facilities related to general hygiene
and sanitation, beautification, and solid waste collection.
Various studies in the decentralization of ENR functions time and again however point out to
serious conflicts and gaps in the devolution of functions mandated by the LGC of 1991.
Compared with the other provisions, the ENR (and public works) provisions of the LGC are not
as explicit and as clear. In many occasions, national government agencies still maintain the
power to control, supervise, and review many of the supposedly devolved services even as LGUs
are held responsible for them resulting in confusion, overlaps, and duplication of functions. The
accomplishments and state of decentralization in the ENR sector has been described as at best
partial and at worst miniscule and insignificant and hardly able to involve the bulk of
functions stipulated in the LGC (Leagues of Municipalities, 2006).
The effective involvement of LGUs in ENR efforts had been hampered by challenges, in human
resource, financial, organizational and political capabilities and resources. For one, the resources
and personnel transferred to LGUs were not commensurate to the cost of the devolved functions.
It is estimated that provinces absorbed 45.6 percent of the total cost of devolved functions,
municipalities 47.4 percent, cities 7.0 percent, and barangays O percent. In contrast, the shares of
LGUs in the IRA are provinces 23 percent, cities 23 percent, municipalities 34 percent, and
barangays 20 percent (Manasan 2002). Among government agencies, the DENR has the lowest
number of personnel devolved to LGUs at around 4.2 percent (ADB and World Bank, 2004).
The findings of the National Capacity Self-Assessment Project of the Government of the
Philippines, UNDP and GEF, suggested that most LGUs currently have low capacities to address
environmental matters relating to, climate change, biodiversity conservation, land degradation
,and drought (GOP, UNDP, GEF, 2005; LMP, undated). LGUs have to face both lack of
personnel and lack of technical capacity since specialized knowledge, skills, technical knowhow,
as well as experience (e.g. in cadastral survey, environmental planning) were largely lodged in
the staff bureaus at the central office (Gonzales as cited by Manasan 2002; Brilantes 2009).
Personnel transferred did not assume the inherent functions (e.g., Community Development
Officers) for the LGU. Furthermore, support mechanisms such as IEC, financial assistance, and
infrastructure & facilities are lacking. In several instances, functions supposedly devolved
already reverted back to national DENR offices. Lastly, a monitoring scheme to determine status
of devolved functions is absent.
At the institutional level, it has been observed that instead of a support role, national agencies
still intervened in the way LGUs managed implementation of devolved tasks, policies, and
programs (LMP, 2006). The lack of a clear prevailing regulatory framework permitted and
encouraged the existence of a two-track delivery system, where both national government
agencies and LGUs can initiate devolved activities (Manasan 2002). In addition to international
commitments, numerous environmental laws and issuances have engendered policy conflicts.
There was an instance where a protected area intended for mining development was at the same
time claimed as an ancestral domain (Brillantes 2009).
The good news however is despite these challenges LGUs were able to effectively absorb some
ENR functions. The DENR points out that of the eight devolved functions identified, regulation
of fishing in municipal waters and ESWM were perceived as successfully and effectively
performed by LGUs (DENR, 2008). Successful efforts to protect and sustainably use
environmental assets (like water bodies, parks, seascapes and landscapes) and natural resources
(like forests, fisheries, minerals, soils, water, and renewable energy) have been initiated by LGUs
and recognized by award bodies such as the Galing Pook Awards. Generally, the absorptive
capacities of LGUs however vary due to factors which include uneven commitment and
capacities.
The LGC mandates that LGUs receive 40 percent share of such collections. LGUs however have
experienced delays and non-release of mandated shares of local governments from natural
resources fees and taxes collected by the national government for the utilization and
development of national wealth in their jurisdiction (Manasan 2002). In the case of the
Malampaya natural gas project in Palawan, the province has not yet received its due despite the
project being in operation since 2001.
Towards Further Devolution
Recognizing that there is much to be done, LGUs, civil society, the national government, as well
as the academe is pushing towards further devolution of ENR functions in accordance with the
letter and spirit of the local government code. Enumerated are ENR functions that warrant
further devolution:
According to the League of Municipalities, the tasks of forest management, protected area
supervision, land registration, water resource management, mineral resource development, and
environmental impact assessment should be devolved to the LGUs within the next 6 years.
Within the next 12 months, local governments are expected to regulate and develop natural
forests and forestlands within the jurisdictions of the LGUs. Local forest management will cover
old-growth, residual and plantation forests and pasture lands in the public domain, in accordance
to existing regulations and standards of management prescribed by law.
The local government units can supervise protected areas by administering declared and enacted
protected areas having portions of their boundaries found within the jurisdiction of LGUs. For
protected areas that extend to more than one LGU jurisdiction, they shall be administered jointly
by all hosting LGUs.
Within the next three years, the services of land registration and mineral resources development
will be devolved. All processes and procedures to register lands shall be regulated by the LGU
within whose area and jurisdiction the land is located. The principal repository of patents and
titles shall be the LGU, but with official copies of the same deposited in the National Statistics
Office.
Under devolution, water resource management shall be subject to the principal authority and
regulatory supervision of LGUs. Subject to procedures, standards and specifications to be issued
by the national government, LGUs shall create multi-sector Water Regulatory Boards to ensure
the water security of their citizens.
The localization of mineral resource development and environmental impact assessment (EIA) is
expected within six years. In a decentralized environment, the final approval for all mineral
extraction activities at any scale shall be reposed on LGUs, subject to check-and-balance
standards and procedures to be set up by competent national authorities or by law. On the other
hand, all EIA processes and certifications shall be reposed upon LGUs (singly or jointly) where a
subject development project is to be located.
Several conditions need to be met in order to ensure that the goals of decentralization of the ENR
functions are accomplished. These include the consolidation of policy and the policy direction,
the clarification of roles and relationship of both LGU and DENR (and also among LGU levels)
in ENR matters, appropriation of adequate resources, and capacity building and development.
In terms of policy and policy direction, there is clearly a need for both the national government
and LGUs to renew their commitment to decentralization and pursue further devolution in line
with the LGC. First on the agenda should be clarification of the policy, as well as the respective
roles of NGAs and LGUs in ENR. Because the LGC was not very explicit and clear about the
delineation of roles as well as administrative matters, all the agencies, as well as local
government units involved in ENR need to sit together and finalize the direction and the manner
with which they shall proceed.
In line with reinventing government principles advanced by Osborne and Gaebler in the book
Reinventing Government, the League of Municipalities strongly advocates for a steering role
for the national government and a rowing role for LGUs. They propose that DENR should shift
from regulatory mode to a development mode and that DENR relinquish control of LGUs in the
devolved areas.
For them, the steering role of national government and DENR includes the following: (1) Policy
determination and international relations, (2) Setting of guidelines and standards, (3) Generation
of knowledge and technical information, (4) Implementation of national-level programs, (5)
Monitoring and evaluation of ENR policies, programs, (6) Resource allocation for ENR, and (7)
Accreditation and certification of LGUs and ENR personnel.
On the other hand, there is a preference for strengthening regional offices of DENR. Under the
premise that regional offices may be able to better monitor, assist, and provide the necessary
technical guidance and support to LGUs, existing Regional Offices of the DENR should be
converted into Regional Technical Centers to support and monitor LGU ENR functions within
the region. They shall derive technical guidance and assistance from DENR bureaus and perform
the following roles (LMP, 2006): (1) Technical support, (2) Oversight and monitoring, (3)
Coordination and liaison with ENR Bureaus, and (4) Personnel training.
LGUs are expected to row by translating national policies to local needs as well as managing
devolved tasks. The proposed role and functions of LGUs include: (1) Policy implementation
through adoption of national policy in local development and program/project formulation; (2)
Adoption of local policies and legislation in accordance with national policy and local priorities;
(3) Administration and regulation of devolved functional areas; (4) Generation of funds for local
ENR operations; and (5) Serve as partner in the implementation of national programs in their
jurisdiction.
Institutional arrangement
The difficulty of addressing ENR concerns with an area wide impact not divisible by local
boundaries (e.g. soil erosion, water quality deterioration) as well as the demonstrated success of
inter-LGU cooperation has led to proposals in formalizing this mechanism and coming up with
inter-LGU organizations and higher level regional bodies (Elazegui, undated ).
LGUs will benefit in the establish and strengthening of inter-local cooperation especially in
common service areas such as environmental governance, integrated area planning, information
and communications technology adoption, procurement, human resource development, and
financial management (Magno, 2009)
Of course, given the current limitations of the LGC, there is a need to set the appropriate policy
framework and guidelines for inter-local cooperation. This will guide LGUs who wish to enter
into inter-LGU arrangements as well as make inter-LGU arrangements binding and less
susceptible to sudden changes in people or priorities of sitting officials.
In order to maximize resources as well as improve coordination and overall management, there is
a need for a more rationalized organizational set-up with minimal overlap and duplication of
roles. LGUs through the LMP, is advocating for the management of ENR offices at the
provincial, city, or municipal level. Provincial Environment and Natural Resource Offices
(PENROs) as well as City Environment and Natural Resource Offices (PENROs) should be
placed under supervision of LGUs (LMP 2006). Initially, DENR personnel transferred to LGUs
be funded by the national government initially for 5 years, then absorbed by the LGU on the 10th
year (LMP 2006).
Resources
Lack of resources is often cited as the primary reason why LGUs are not able to successfully
manage devolved functions. Because budget allocation for ENR functions at the LGU is not
explicitly provided, it is not unusual for local executives to underfund it. Also, despite provisions
allowing them to charge user fees and environmental taxes, LGUs have generally been unable
(or ineffective) to generate sufficient resources to augment their IRA allotment and fund their
ENR programs.
LGUs propose cost-sharing between national and local government for ENR programs. One way
is to reactivate the NGA-LGU cost sharing arrangement adopted by the NEDA Board in 2003.
Geologue proposed formulation of a national policy prescribing local budgetary allocations for
ENR purposes (Geologue, undated). Manasan on the other hand proposes the design of a
matching grant for ENR management. In this arrangement, the national government can provide
LGUs with grants they will match and can use for a specific purpose only (Manasan 2002). They
also propose setting a minimum IRA allocation for local ENR functions.
In addition to cost-sharing, there is also a push for greater local fiscal autonomy. As the LGC
does not impose caps on fees and user charges that may be imposed by LGUs, national
government agencies should remove prescribed caps on fees that may be charged by LGUs.
NGAs should avoid as much as possible to dictate how to use local funds especially for activities
that are locally funded (e.g. DBM placed a P900/ day cap on budget for training and seminars).
LGUs also look forward to regular and automatic release of LGU shares in national wealth and
other taxes.
Capacity
Recognizing the disparity in the capacity of various LGUs to manage ENR roles and functions,
the LMP proposes a capacity-based transfer of roles. LMP proposes that a certification system
for LGUs be prepared by the DENR, DILG, and the local government through the Leagues to
assess and certify LGUs in terms of capacity to assume specific devolved functions on schedule
(LMP, 2006). Devolution of roles will be made gradually based on capacity to assume but with
the end view that all appropriate functions will eventually be devolved. Geollegue, suggest that
highly technical functions in which LGUs demonstratively lack technical capacity should be
returned to the central offices altogether (Geollegue undated).
Local fiscal autonomy also requires developing capacity of LGUs for revenue generation.
Pampanga, under the leadership of Fr. Ed Panlilio has shown the vast potential of judiciouslyapplied and well-managed environmental tax systems to contribute to local finance (Torneo
2008). Technical assistance in this area may have a significant impact on LGU financial
performance.
A complementary proposal is to utilize funds from Official Development Assistance (ODA) and
Government Financial Institutions (GFI) to catalyze public-private partnerships and effectively
assist lower-income class LGUs (Magno 2008). LGUs are also challenged to find ways to
stimulate private financing of ENR programs/projects. Lastly, LGUs can ensure that taxes
collected from a declared protected area go directly to the protected area management board.
(Elazegui, et al., 2002)
There is also a pressing need to build local capacity to take on the devolved roles (Magno 2008;
Brillantes 2009). Capacity development towards local autonomy entails the development of the
following:
Environment and Development Planning
Administrative Governance
Resource Allocation and Utilization
Resource Mobilization
Financial Accountability
Stakeholder Participation
Health
Provinces are mandated by the LGC to provide health services which include hospitals and other
tertiary health services. Municipalities are tasked to provide services which include the
implementation of programs and projects on primary health care, maternal and child care, and
communicable and non-communicable disease control services; access to secondary and tertiary
health services; purchase of medicines; medical supplies, and equipment needed to carry out the
services. Barangays are tasked to render health and social welfare services which include the
maintenance of barangay health center and day-care center.
Grundy, Healy and Sandig points out that the devolution of health care services (HCS) have
three main goals. The first goal is to increase the resource base for primary care, by moving
resources from the center to peripheral locations. The second goal is improving responsiveness
of authorities of local officials to local health needs and situations by broadening the decision
making space of middle and lower level managers. The third goal is to enhance the efficiency
and effectiveness of health services by bringing management closer to the recipients for prompt
action (Grundy, Healy and Sandig, 2003). The results of the devolution of HCS have been mixed
so far.
A three country study found that based on a set criteria, the Philippines demonstrate one of the
most extensive levels of decision-making in an administrative sense relative to Indonesia and
Vietnam. There is evidence however to suggest that decision-making often can be constrained by
a) politically-based priority setting of local officials, which at times are viewed by health
managers to be in conflict with priority setting based on health needs and b) low availability of
funding limits the capacity of middle-level managers to exercise decision-making powers
(Grundy, Healy and Sandig, 2003).
In terms of efficiency and effectiveness perceived results are mixed with some studies suggesting
improvements in service and others suggesting decline (). Devolution has resulted in numerous
challenges. For example, the perceived limitations to mobility (in terms of promotion) of
devolved personnel as well the decline of number of scholarships for health workers have
affected morale. Coordination and referral among health units have also suffered. Some LGUs
ride on the availability and proximity of hospitals and other health services in nearby LGUs. The
inability of some provinces to cope with the high costs of maintaining tertiary level hospitals has
led to the renationalization of several hospital facilities. Corruption, especially in the
procurement of medicines and other supplies continued in a localized setting (Liga ng mga
Barangay 2006).
Similar to the ENR sector, most often cited impediment to the effective devolution of the health
sector is budget constraint (Brillantes 2009; Magno 2001; Mankila 2006; Liga ng mga
Baranggay 2006; Ferrer, 2006). Although initially, there has been nominal increase in the
funding for health services by LGUs after they received their IRA allocations from 1995 to 1998
(Schwartz, Racelis, and Guilkey 2000), the budget allotted for devolved health services through
the IRA is not commensurate to the cost of the devolved functions (Magno 2001; Mankila 2006).
Furthermore, LGUs in general heavily depend on the IRA and have been unable to generate
enough revenues to cover operational costs. Despite LGC provisions on revenue generation,
ADB according to Mankila reports that in 2006, revenue collection accounted for less than 10
percent of total expenditures in HCS among LGUs. Some studies also suggest that there is
significant underspending by LGUs for health services as LGUs shift priorities (Magno 2001).
Financing shortfalls in some cases has resulted into the diversion of health funds to other
priorities.
The impact of resource constraints in health services is deep. For one, the limited resource base
has been cited as a major impediment in the decision-making process of local health managers
(Grundy, et. al 2003)). There are reports of short supplies of medicines, equipments, and a
perceived decline in health care in some cases. Several localized hospitals devolved to LGUs
have been renationalized. Local health workers are also complaining about low wages and not
receiving the commensurate salaries and benefits due to non-compliance of some LGUs with the
Magna Carta for Health Care Workers as well as the Barangay Health Workers Benefits and
Incentives Act.
Some LGUs fund the additional wages and benefits of health workers from savings, a practice
that does not guarantee proper compensation and is contrary to law. Scholarship programs for
health workers, which were widely available prior to decentralization, have also been scarce. As
thousands of nurses and other medical personnel leave the country, LGUs are finding it
increasingly difficult to retain health workers.
Despite challenges, there is a general push for greater devolution of health services in accordance
with the LGC. In 2006, the League of Baranggays prepared a position paper pushing for further
devolution accompanied with the corresponding resource, technical, as well as capability support
from the national government. They are proposing the following (Liga ng mga Barangay 2006):
Localization of programs such as malaria control, leprosy, filariasis and schistosomiasis
eradication within the next 6 years.
Assumption of cities and municipalities of regulatory functions such as the issuance of permits to
drug stores, dental and medical clinics should be devolved since the LGU already issues the
business permits of these establishments within 2 to 3 years.
Maintenance of a health information and surveillance system that will immediately attend to the
situation at the ground level.
The return to local control and management of renationalized hospitals, particularly those
categorized as primary and secondary hospitals (the national government, on the other hand,
should retain existing national hospitals and other training hospitals with tertiary capabilities) is a
devolution priority.
There are also demands to devolve public health service provision in terms of personnel
management, capacity building, institutional/ organizational development, financial
management, and governance and participation.
A major question however is, whether the DOH is prepared and whether LGUs are capable of
further absorbing the abovementioned functions given their current status. Many LGUs presently
face common problems. These include resource constraints in construction and improvement of
health facilities, health workers benefits; inefficiency and politicization in the management of
some resources for public health, like medicine procurement; and the general lack of local
government health personnel and facilities (Atienza, 2004).
Resources
There are several proposals brought up to address resource issues in DHS. These include
recommendations for the national government to share in the financial burden created by the
benefits and salaries (i.e. as defined the Magna Carta for Health Workers ) as well as the
implementation of, and other non-monetary benefits such as continuing education. DOH or the
national government may be requested to provide matching grants to support enhancement of
these services (Lieberman et. al., 2005).
The percentage of budget allotted to health be raised to 5 percent of both national government
and LGUs and pegging the Internal Revenue Allotment (IRA) for health to a fixed percentage. It
is expected that setting health budget as a percentage of budget will compel both the national
government and LGUs to allocate budget for DHS and not set it aside as low priority, as have
been observed in some cases. It will also protect the budget for health services from being
subjected to politically-based diversion or non-prioritization of local officials.
The Department of Health (DOH) and the national government should provide greater fiscal
autonomy to hospitals to reduce their dependence on direct subsidies from government. One way
is to amend auditing procedures for hospitals run by LGUs in order to allow for greater
flexibility and innovation in terms of financial management. The current system follows that for
the national government which hinders innovative and efficient hospital management (8th RFA
as cited by Brillantes 2009). Provincial hospitals should be allowed to retain their income as trust
fund to enable them to sustain their operations without unduly burdening the national and
provincial governments.
The capability of LGUs to generate revenues and manage finance should be developed. So far,
the assessment is that generally, LGUs have not been able to maximize their taxing powers as
well as their authority to impose of user charges. Lieberman recommends implementing
carefully designed user charges in order to raise funds to sustain health programs and subsidize
the health needs of the poor. Pricing, billing and collection systems of devolved facilities can
also benefit greatly from technical assistance (PIDS 1998)
Of course, LGUs need to improve service quality if they are to charge higher fees.
Personnel
Other personnel issues and concerns have also surfaced after devolution. As mentioned before,
there is a lack of career path and reduction in the upward mobility (in terms of promotion) of
devolved health personnel. The reduced number of scholarships also limits the development of
health professionals and their capacity to manage health programs and services. Another issue is
a lack of health personnel and services especially in far-flung rural areas.
In order to address these, it is proposed that career paths for local health officials and personnel
be developed, possibly in cooperation with the Civil Service Commission (CSC) and the DOH
(Liga ng mga Barangay 2006).
More opportunities for capacity building (e.g. scholarship, training and continuing education)
need to be opened to local health professionals. It is expected that health professionals who know
more about health programs and projects at the local level should manage health services.
Acquisition of capacities to formulate coherent health plans and budgets to enable LGUs to
effectively attend to the health requirements of their people are needed (Liga ng mga Barangay
2006). Training personnel in hospital administration, public health or other fields is important in
preparing them for higher positions.
10
LGUs should fill up vacant positions for rural health practice and tap OJTs (on the job trainees)
to address inadequacies in manpower. LnB also proposes that LGUs also develop a system to
encourage doctors, nurses and midwives to continue their work even outside Metro Manila and
other urban centers. One approach is to encourage or even require medical and paramedical
students and fresh graduates to render rural or urban poor service (Liga ng mga Barangay 2006).
Funds for implementing the Magna Carta for health workers should be prioritized in the budget
of LGUs. There is also a demand for an increase in the benefits and salaries of doctors, nurses
and other health care professionals, and their exemption from the Salary Standardization Law
(Brillantes 2009).
Institutional Arrangements
Health concerns transcend political and administrative boundaries and coordination is necessary
among health units. Magno points out that devolution has aggravated the lack of coordination
between LGUs and resulted into free-riding and negative externalities (Magno 2001). LGUs
need to develop a system of collaboration and referral among the different levels of government
health-service providers to attend to the needs of their constituents. Devolution requires
redefinition of the functional relationship between regional offices and LGUs in the provision of
technical assistance and the setting of standards (Liga ng mga Barangay 2006).
Grundy, et al. found that in the Philippines the health referral system lost cohesion after
devolution. Specifically, logistics, transport, patient referral protocol, distinctions between levels
of service were all disrupted by the unclear arrangements regarding local government cooperation as well as under-financing. This is consistent with findings in other research which
show that grey areas of responsibility as well as lack of preparation, complicate efforts to come
up with a rational arrangement for health services in the process of devolution (Grundy et. al.
2003).
While there are the prospects for health service delivery devolution, the DOH still faces major
hurdles to full localization. There is difficulty in integrating of health services because of
separate administrative control. This stems from several problems such as the disconnection in
the information management between national and local units; inadequacy in distributed health
resources; gap in the referral/ networking system; non-maximization of regulatory powers; and
the absence of financial leveraging mechanisms. Government agencies are anticipated to
strengthen inter-agency cooperation on various aspects of health research (Health Intelligence
Service, PCHRD, Department of Science and Technology).
The proposals are to:
Establish and strengthen inter-local health systems and their subsystems (integrated health
planning, referral system, health information system, drug management, human resource
development, and financial management).
At the Baranggay level, some LGUs have effectively employed a clustering strategy. Galing
Pook winner, Cotabato Office of Health Services, grouped its 37 barangays into seven clusters
11
with each cluster under the supervision of a coordinator to simplify the task of supervision and
monitoring and allow them to immediately respond to the concerns of the barangays within their
jurisdiction. (PIDS 1998)
Institutionalize information/ public information units down to the barangay level to improve the
gathering of health intelligence/statistics. To incorporate and support a computer network for
health information and surveillance, referrals and logistics (Liga ng mga Barangay 2006).
Develop a policy and program to consolidate all emergency medical services in the country with
regard to disaster preparedness (Liga ng mga Barangay 2006).
Develop a system of collaboration and referral among the different levels of government healthservice providers to attend to the needs of their constituents (Liga ng mga Barangay 2006).
Redefine the functional relationship between regional offices and LGUs in the provision of
technical assistance and the setting of standards (Liga ng mga Barangay 2006). The role of the
regional health office is limited to managing the regional hospitals and assisting the national
agency in the implementation of public health programs. (Magno 2001).
Other Recommendations
According to the 7th Rapid Field Appraisal (RFA) conducted by ARD/GOLD, Local Health
Boards are not yet fully functional in many areas. Efforts should be made to assist LGUs in
activating their local boards. The mandate and functions of local boards should be reviewed and
communicated to localities through more creative information, education and communication
(RFA as cited by Brillantes 2009).
Furthermore, DOH Field Offices and the Population Commissions Provincial Offices is not yet
geared to provide technical assistance to LGUs (ARD/GOLD as cited by Brillantes 2009).
The municipalities also urge the review the National Health Insurance Act to make it more
responsive to the needs of the urban and rural poor. The LGUs also see that the impact and
effects of devolution on health services should be evaluated once every three years in a Health
Summit attended by all stakeholders. They also emphasized the importance of providing greater
power to the local health board
In reference to the lessons learned by the DOH in their devolution experience, the success of
localizing public health service provision is highly dependent on the readiness of LGUs to absorb
the management of a devolved health system. It is important to strengthen health Systems to
make devolution work.
Social Welfare
The Local Government Code devolves to provinces the implementation of social welfare
services which include programs and projects on rebel returnees and evacuees; relief operations;
and population development services. Municipalities are expected to provide social welfare
12
services which include programs and projects on child and youth welfare, family and community
welfare, womens welfare, and welfare of the elderly and disabled persons. They also manage
community-based rehabilitation programs for vagrants, beggar, street children, scavengers,
juvenile delinquents, and victims of drug abuse; livelihood and other pro-poor projects; nutrition
services; and family planning services.
The initial outcome of the devolution process is the restatement of the Department of Social
Welfare and Development (DSWD) mission. The new mission statement highlighted the need to
build partnerships with local government units, non-government organizations and peoples
organizations in social welfare and development service delivery.
Devolution required the agency to restructure. Shifts of tasks from Sectoral Bureaus to
Functional Bureaus at the Central Office Level ensued. 14 Field Offices as extension units of the
Office of the Secretary with focus on field monitoring and technical assistance were also
established.
The devolution called for an increased role of LGUs in collaboration with the national office in
social welfare and development (SWD) Policy and Plan Formulation, Social Technology
Development, Standard Setting and Compliance Monitoring, Technical Assistance and Resource
Augmentation, Institutional Strengthening and Management.
Even though devolution of DSWD resulted in several restructuring of the national agency to
accommodate local needs, the Department confronts several challenges.
First, less priority is given to SWD concerns in local development plans (Magno, 2009;
Brillantes 2009). The result is that allocation of resources for SWD programs, projects, and
activities has experienced a decline since devolution. ADB and WB, found that LGU
contribution to overall SWD expenditures have declined from 11 to 10 percent despite the fact
that 60 percent of DSWD personnel were devolved (ADB and WB 2006). The gap between
actual need and funding is especially visible in low-income municipalities (Brillantes 2009).
Second, LGUs tend to prioritize infrastructure development over total human development
(increased capacity of people to participate and decide in the allocation of LGU budget). More
than fifty percent of SWD expenditures of LGUs are personnel costs of devolved SWD staff,
leaving little for SWD programs and projects (ADB and WB 2006).
Third, there is weak compliance to DSWD reports at the local level. Program reporting is not
prioritized by local workers due to heavy workload. LGUs are seen as having low appreciation
for local SWD reports as bases for effective planning and advocacy for larger share in local
resources.
Fourth, there are SWD worker issues that need to be addressed. For instance, the creation of the
Municipal Social Welfare and Development Officer (MSWDO) position is not considered
mandatory under the Local Government Code. Some municipalities therefore opt not to appoint
an MSWDO. Service providers are usually overworked with very low compensation. There is
limited MOOE support which also limits access to capability building opportunities.
Fifth, Laws such as the Juvenile Justice and Welfare Act, Magna Carta for Disabled Persons, and
the Senior Citizens Act, among others, are seen as unfunded mandates from the national
government (Brillantes 2009). Sixth, partisan political considerations influence the selection of
13
program beneficiaries particularly during campaign periods. Lastly, there is lack of facilities and
ICT resources to accommodate the growing needs of SWD clients.
Much of the resources for programs and projects flow from foreign assisted national programs
and projects such as the Countrywide Integrated Delivery of Social Services (CIDSS), and more
recently the Pantawid sa Pamilyang Pilipino Program (or P4).
To address the post devolution challenges, DSWD has started various initiatives. The agency has
implemented the systematic assistance to local government units through the assessment of their
capacity and willingness to invest in SWD programs/ services. This serves as basis for the
formulation of DSWD Technical Assistance and Resource Augmentation Plan.
The Department has also initiated the formulation of a national policy framework for social
protection to harmonize the initiatives of intermediaries and stakeholders. They also have
continuously enhanced the Medium Term Expenditure Plan (MTEP) to secure funding (in the
General Appropriations Act) for unfunded social welfare and safety net programs emanating
from social legislations. The DSWD Policy and Planning Department also initiated an
assessment study of devolved SWD programs and services to determine LGUs degree of
compliance in the implementation (Brillantes 2009).
The DSWD has started working towards the institutionalization of an objective and transparent
targeting mechanism to identify beneficiaries of social protection programs at both household
and community levels. They have encouraged the participation of intermediaries in standards
enhancement and compliance monitoring (i.e. Area Based Standards Network).
The Department created mediums for intermediaries continuing education and learning across
regions (i.e. SWD Learning Networks). They have continuously developed training modules
based on the results of competency assessment for DSWD personnel, partners and
intermediaries. Social marketing plans in support of sectoral plans and completed social
technologies were formulated. Furthermore, the Agency has accessed internal and external
assistance to complement the available but limited resources of local government units and nongovernment organizations to implement SWD programs and services.
Agriculture
Under the Local Government Code, the devolved functions for the province include agricultural
extension and on-site research services and facilities which include the prevention and control of
plant and animal pests and diseases; dairy farms, livestock markets, animal breeding stations, and
artificial insemination centers; and assistance in the organization of farmers and fishermans
cooperatives and other collective organizations, as well the transfer of appropriate technology.
For the municipality, the devolved functions include extension and on-site research services and
facilities related to agriculture and fishery activities which include dispersal of livestock and
poultry, fingerlings, and other seeding materials for aquaculture; palay, corn, and vegetable seed
farms; medicinal plant gardens; fruit tree, coconut, and other kinds of seedlings nurseries;
demonstration farms; quality control of copra and improvement and development of local
14
distribution channels, preferably through cooperatives; inter-barangay irrigation systems; water

and soil resources utilization and conservation projects; and enforcement of fishery laws in
municipal waters including the conservation of mangroves. Barangays are tasked to provide
agricultural support services which include planting materials distribution system and operation
of farm produce collection and buying stations.
According to the Department of Agriculture (DA), the devolution process had mixed results.
Localization trimmed down their technical personnel from 37,000 to a little over 15,000. The
devolution resulted in the decrease in the DAs control over the actual implementation of the
national programs in the field level. Financial resources were limited to target programmed areas
that provides higher agricultural production. Furthermore, achieving the goals of food
sufficiency slowed down due to non-prioritization of local executives.
There are issues and challenges the DA need to address in terms of the devolution of agricultural
functions. The nature of decentralization remains unclear. There are questions with regard the
allocation and definition of responsibilities and functional relationships. Linkages in training,
research and extension are also seen as weak (Manero as cited by Magno 2001). LGUs and
farmer-clientele still depend on the DA at the national level when it comes to technical
assistance, provision of planting materials, and provision of animals for production stations and
centers.
The devolution of the agricultural sector showed that interests and prioritization of the LGU
officials vary (Brillantes 2009). When asked in a survey to assess their level of compliance,
Barangays responses were banked towards seldom and never degree when it comes to
implementing the agriculture mandate of the LGC; municipalities gravitates toward the
sometimes column; the provinces, figures are relatively high in the always column. Services
such as the provision of livestock markets, animal breeding stations and artificial insemination
appeared had similar ratings for both provinces and municipalities in both the always and the
never columns (League of Provinces of the Philippines 2006).
The same set of survey also came produced the top ten (10) problems that are always
encountered by LGUs in performing agriculture related tasks (League of Provinces of the
Philippines 2006). These include:
Financial Constraints
Financial Constraints of Clientele
Insufficient/Delayed Transportation Allowance
Politics
Lack of Transportation Facilities
Repayment of Loans
Dole Out Mentality of Farmers
Marketing
Devolution Related
Problems with the Bureaucracy
15
As with the other devolved sectors, funding is cited as a major factor in the implementation of
devolved functions in the agricultural sector. Funding has not supported devolution as much as
might have been desired. In the case of DA, the central office retained the bulk of the funds
despite devolution of a large number of personnel. In 1997, only 6 percent of budget has been
appropriated for DA regional offices despite the expectation that they will absorb the bulk of
coordinative, technical and support functions under devolution (Magno 2001). LGUs receive low
technical support from these regional offices (Siamwalla 2001).
The DA makes available funding for programs supporting national programs and goals. In order
to access these funds, however, LGUs have to adjust their local plans to fit the national agenda
even when it does not necessarily match local goals (Cabanilla 2006).
Extension workers at the local level do not have the authority to provide policy, allocate
extension resources, and monitor the implementation of agricultural extension programs
(Brillantes 2009). Devolved agricultural workers are at times assigned lower salary levels
compared to employees of the national government and local government units (LGUs). In some
cases, they are displaced or assigned to other (non-agricultural) positions as the municipal
agricultural officer position (MAO) is not mandatory for cities and municipalities (HOR 2006;
Siamwalla 2001). Unsurprisingly, lack of motivation among the devolved personnel has been
observed in several occasions.
Moreover, it is seen that a number of extension workers in LGUs are slowly deteriorating
because of lack of opportunity for technical trainings, lack of scholarship grants, non-motivation
from local leaders, and the politicization of the sector at the local level (Magno 2001; Brillantes
2009; Siamwalla 2001).
Issues in funding, linkage, and personnel have negative implications on the capability of LGUs
to plan manage and address issues in agriculture and fisheries. Local government units are
required to prepare both a yearly Food Security Plan as well as a Comprehensive Land Use Plan.
In the absence of capable personnel, very few are able to make use of updated methodologies
and technology (Cabanila 2006). In cases of municipalities without a municipal agriculture
officer, the responsibility of coordinating agriculture programs may likely fall to someone
without expertise in the field.
LGUs have participated in efforts to assess and set the direction for further devolution of the
agricultural sector. Collated results of two self-administered surveys of the Committee on
Devolution of E.O. 444 and the League of Provinces of the Philippines in cooperation with the
Philippine Institute for Development Studies (PIDS), and the Economic Policy Reform and
Advocacy (EPRA) Project of the Ateneo School of Economics revealed varying levels of
compliance.
Policy
In order to steer, the DA need to formulate a National Agriculture and Fisheries Policy and
Strategic Plan in consultation with LGUs. This will specify the guidelines, technical assistance,
16
funding and monitoring and evaluation systems that shall guide LGUs in implementing and
coming up with agriculture programs and projects (League of Provinces of the Philippines 2006).
Provinces need to come up with their Provincial Agricultural Development Strategic Plan
incorporating the necessary guidelines, technical assistance, funding and monitoring and
evaluation systems for their component cities and municipalities. Municipalities/cities on the
other hand may come up with their own agricultural development strategic plan. An Annual
Performance Plan may be developed parallel to these programs (League of Provinces of the
Philippines 2006).
The DA and LGUs need to revisit and redefine their mandates. The DA, as a national agency,
should shift its focus from a commodity (production) to goals within the framework of RA
8435, or the Agriculture and Fisheries Modernization Act (AFMA) of 1997. These goals include:
1)Prosperity of Farmers; 2) Competitiveness; 3) Food Security; 4) Sustainable Production
Systems (League of Provinces of the Philippines 2006).
Institutional Arrangements
Plans and programs need to be integrated at all levels from baranggay, to municipal/city,
provincial level up to the DA. Bottom-up planning, consultation and participation of the
stakeholders is needed. LGUs need to be able to coordinate, collaborate, complement, and
consolidate efforts and agree on accountability and resource sharing mechanisms. They must be
able to translate national goals and define specific roles and targets for local development
programs and projects. LGUs should be able to define their specific roles in rendering
appropriate extension service, setting their regulatory scope, formulating their research and
development niche, and contributing to information, education, and communications campaigns.
The DA needs to identify viable areas of operation (e.g. province, municipal clusters, etc.) and
coordinate accordingly. The LPP pointed out that provinces are currently the most viable areas or
units of operation and recommends that the DA should coordinate at this level.
Capacity
The DA needs to strengthen its capacity to deliver extension services, provide capabilitybuilding/technical support to LGUs, and perform effective regulatory functions and state-of-theart research and development (League of Provinces of the Philippines 2006). Focusing on
building the capability of regional level offices, which oversee and provide support to large
functional clusters may be the more practical and cost-effective approach.
Resources
LGUs need to allocate and utilize resources from their Internal Revenue Allocation (IRA) shares
and grants for national and local programs. Funds for implementation must accompany national
programs implemented through LGUs. A National Fund Transfer System (NFTS), a funding
facility, must be established. This should prioritize those who are in need and allow capable
17
LGUs to buy into grants thereby ensuring equitability of resources and incentivizing good
performance (League of Provinces of the Philippines 2006).
Other Recommendations
While the problems of devolution are ever present, the DA has identified several reform
directions. Involved are the conduct of several consultation dialogues with stakeholders;
development of the national agriculture and fisheries research and extension program; and the
transfer of the Central Office of major operating units in the different parts of the country to
ensure closer supervision, coordination, and monitoring of agricultural programs (Magno 2009).
Continuous process of communication between LGUs and national government regarding the
programs and thrusts for economic development must be facilitated. Decentralization, as
examined from the experience of the DA should have mechanisms to fully prepare the personnel
economically, socially, and emotionally.
In addressing the present challenges, the DA should strengthen partnership with LGUs and the
national government. The national agency should grant financial incentives to the DA-LGU
Centers. The Department should develop comprehensive trainings and retooling programs. It is
expected to redefine the roles of Provincial Agricultural Extension Services. Continuous
coordination between the DA and LGUs is required for the programs and thrusts of agriculture
down to the local level to achieve greater productivity (Magno 2009).
Conclusion
Although reviews are mixed, there is no denying that decentralization has accomplished much in
terms of brining government and resources closer to communities. Devolution has redefined the
roles of both national and local governments, promoted self-management and accountability, and
promoted local leadership . The Galing Pook, Gawad Pamana, Clean and Green, Lingkod Bayan,
Magsaysay Awards, Konrad Adenauer Medal of Excellence, Local Government Leadership
Award has done much to recognize successful innovations of local leaders and government units.
In order for decentralization to be successful, a number of conditions effective and sustainable
need to be present. Cistulli considers the following as among the most important requirements:
adequate financial resources to ensure the performance of the tasks under the responsibility of
the local and decentralized institutions; actual empowerment of decentralized institutions and
enough power and authority to influence the political system and development activities;
accountability mechanisms such as local elections supporting transparency and representation;
legal framework clearly specifying the powers and responsibilities of local governments to avoid
interference and overlapping with central government; and adequate capacities of local
institutions to perform the appropriate services.
Clearly, decentralization in the Philippines has not yet met all of these conditions. Several crosscutting issues are prominent in the devolution of health, environment, agriculture and social
18
welfare. First, resource allocations from the national government did not correspond to the cost
of devolved functions. While resources transferred by the IRA to LGUs were generally sufficient
only to cover personnel costs in the four areas of ENR, SWD, DHS, and Agriculture, there is
little left for the development of programs and projects. Despite provisions for revenue
generation, LGUs have generally not been able to generate sufficient revenue to cover
operational costs of devolved functions and majority are still dependent on the IRA from the
national government. The problem is further exacerbated by unfunded mandates or laws that
pose added costs but does not come with corresponding budgets.
Second, devolution has resulted in fragmentation, loss of coordinative efficiency, as well as gaps
in information dissemination and transfer among the various levels and units of the devolved
sectors. There are still plenty of grey areas and undefined jurisdictions. This is especially true in
concerns which transcend geographical and political boundaries such as health and environment.
Third, national agencies have not yet geared operations towards full devolution of functions
defined in the LGC and LGUs are not yet fully empowered to take on those roles. There is a
tendency for national agencies to maintain control of programs and field implementation units
instead of focusing on policy and standard setting, technical support, and oversight. LGUs also
tend to depend on the national agencies. Roles and responsibilities are not clear. At the present,
interference, grey areas, and overlaps in jurisdiction are observable. Accountability as well as
expectations for meeting national goals are not jointly shared with LGUs and lean towards
national agencies.
Fourth, there is a serious need to address personnel issues. Low salaries coupled with the loss of
career paths, upward vertical mobility, as well as opportunities for education and growth among
devolved personnel has lead to the demoralization and deterioration of vital human resources.
Despite these issues however, there is a consensus among stakeholders that further devolution is
necessary in order to reap the benefits of enhanced local autonomy. Various recommendations
and proposals have been forwarded by both the national agencies, LGUs though the various
leagues, as well as scholars of local governance. The specifics for health, agriculture,
environment, as well as social welfare had already been outlined in the earlier sections. Just as
there are cross-cutting issues however, there are also cross-cutting proposals and solutions put
forwards by the various stakeholders in devolution. Moves toward further devolution will benefit
from considering these proposals.
The first step towards further devolution is to clarify in as clear a language as possible policies,
lines of authority, jurisdictions, as well as sharing of accountability between and among LGUs as
well as between LGUs and national agencies. This should be followed by a corresponding
rationalization of organization as well as appropriate distribution of resources in order to
eliminate overlaps and maximize resources.
As has been clearly articulated in numerous studies, there is clearly a need to reform the IRA to
ensure in order to promote equitable distribution of resources as well as ensure that devolved
mandates are funded. LGUs will greatly benefit from cost sharing schemes with the national
government, such as that promulgated by NEDA in 2003.
19
A more long-term solution however is to temper the dependence of LGUs on IRA and focus on
building the capacity of LGUs to generate revenues using the mechanisms provided by the LGC
to support operations. The IRA was after all, originally intended only to augment LGU resources
and promotes equitability among LGUs - not fund the whole operation of LGUs as some
officials seem to think. Judicious application of taxes, fees, and user charges combined with graft
and corruption-free management of funds is necessary in order to promote local fiscal autonomy.
Revenue generation and fiscal should be prioritized in the capacity-building programs of the
DILG.
Further devolution necessitates the transfer of thousands of employees from the national
government to LGUs. There are still pending personnel issues however. Clearly, there is a need
for a personnel development plan with clear career paths and which allows lateral as well as
vertical movements for local personnel. The DILG can work this out with LGUs, employee
unions, and the CSC.
Regional offices of national agencies have a very high potential to bridge the gap between
national policies and local goals and priorities. Regional offices benefit from coverage,
economies of scale, their proximity to LGUs, and direct linkage with national offices. They may
be in the best position to perform monitoring, technical support and capacity building.
Developing regional offices to provide oversight, technical support, centers of research and
development, and serve as interface between LGUs and the national government in the sectors of
health, agriculture, social welfare, and environment might be a worthwhile strategy. There is also
a need to consolidate local development plans from the bottom up. Information parameters need
to be shared across LGUs and databases need to be linked together in order to facilitate effective
planning and implementation of programs.
Inter-LGU and inter-agency alliances offer another promising mechanism especially in

addressing concerns that transcend political boundaries such as health and environment. There is
a need however to establish the appropriate framework, guidelines and mechanisms to guide
LGUs and to make such arrangements legally binding. Local governments can agree to work
together in a variety of ways. Contracts forged between local governments where one
jurisdiction purchases services from another is one option. Several jurisdictions can enter into a
joint agreement to pool financial resources and personnel as well as equipment (Deller 1998).
Decentralization reform can proceed in a minimalist direction as the reformers seek to close a
capacity gap by limiting local authorities to their core business functions. A more pro-active
approach may seek to enhance the capacity and discretion of local authorities to take on more
functions, engage community participation, and play a greater role in the delivery of
development programs. A middle range approach, espoused by the Leagues, recommends that
LGU preparedness (and corollary assumption of functions) should be determined through
certification procedures. Individual LGUs shall be certified for which functions they are ready or
not to assume. That LGUs vary in terms of priorities and capacities of LGUs to implement
devolved functions is a given. The important thing is to ensure that technical as well as financial
support is made available to LGUs with weaker capacities.
20
In the Philippines, there are four tiers or layers of local governments: provinces, cities,
municipalities, and barangays. The move to advance decentralization in the environment, health,
asocial welfare, and agricultural sectors would require identifying the local tier that would
assume the devolved functions. This would involve further research involving the application of
certain principles in determining the specific functions to be assigned to provinces, cities,
municipalities, and barangays.
The first principle governing the assignment of devolved functions would be the concept of
subsidiarity. This principle states that public service responsibilities must be exercised by the
lowest level of government unless a convincing case can be made for higher level assignment
(Shah and Thompson 2004). The normative rule holds that public services should be delivered at
the most local level possible so that services can be tailored to the needs and preferences of the
local population. The implicit assumption is that local populations will be able to exercise choice
in demanding and defining local service requirements. Another implicit assumption is that the
people know their preferences and priorities better than regional or national governing bodies,
which are better suited to issues of national scope, such as military and trade affairs (Lindaman
and Thurmaier 2002).
Each public service should be provided by the jurisdiction having control over the minimum
geographic area that would internalize the benefits and costs of such provision (Oates 1972). It is
quite plausible to argue that in the matter of service deliveries as well as in local business
development, control rights in governance structures should be assigned to people who have the
requisite information and incentives and at the same time will bear responsibility for the
(political and economic) consequences of their decisions. In many situations, this insight calls for
more devolution of power to local authorities and communities. The state may have to play
certain activist roles: enabling mobilization of people in local participatory development;
neutralizing the power of local oligarchs; providing supralocal support in the form of pump
priming local finance; supplying technical and professional services toward building local
capacity; acting as a watchdog for service quality standards; evaluation and auditing; investing in
larger infrastructure; and providing some coordination in the face of externalities across localities
(Bardhan 2002).
The LGC and the 1998 Fisheries Code transfer a substantial amount of responsibility to local
governments, in particular to the coastal municipalities and cities to engage in coastal
management within a defined jurisdictional area of coastal lands and municipal waters to15 km
offshore. Municipal and city governments have both executive (Mayor, Municipal Planning and
Development Office (MPDO), Municipal Agriculture Office (MAO), and other staff) and
legislative (Vice Mayor, Municipal Council) branches of local government. Municipal and city
governments have the primary responsibility for planning and implementing ICM programs,
including establishing marine protected areas, and enacting and enforcing fishery and coastal
resource-related ordinances. Municipal and city governments receive an internal revenue
allocation from the national government-based population size, land area, and an equal sharing
factor (Lowry, Kem, Alan White, Catherine Courtney (2005).
At the city level, the acceptance and implementation of agricultural services would depend on
the level of urbanization of the area. In Angeles City, services pertaining to the dispersal of
21
livestock and poultry, palay, corn, vegetable seed farms, quality control of copra, enforcement of
fishing laws in municipal waters, dairy farms, and the livestock market are not devolved
(Legaspi and Santiago 2010).
Provincial government has both executive (Governor, Provincial Planning and Development
Office, and other staff) and legislative (Vice Governor, Provincial Council) branches of
government. While the role of provincial LGUs under both the LGC and 1998 Fisheries Code is
not well defined; many provinces are beginning to fulfill an important coastal management gap
to harmonize coastal management policy through the enactment of Provincial Environmental
Codes, developing coordinating mechanisms between municipalities, NGOs, and academic
institutions, to identify and address coastal management issues, and providing technical and
financial assistance to LGUs implementing coastal management. The provincial mandate to
directly implement ICM activities is limited and thus implementation occurs mostly through
municipal and city governments. (Lowry, Kem, Alan White, Catherine Courtney (2005).
This model also argues for service delivery based on the benefits principle of public finance,
namely, that, as much as possible, services should be funded through user fees, and basic
community services such as police and fire protection (which have significant externalities) can
be funded through local taxes. Services mandated for delivery by the central and regional
governments are properly funded through grants in the form of intergovernmental transfers
(Lindaman and Thurmaier 2002).
In contrast to central controls and extensive earmarks of local funding, decentralization should
give local officials increased authority to shift funds to improve service delivery.
Decentralization should be associated with improved service delivery. The performance of
services and the decentralization process itself should be monitored and evaluated by citizen
groups through surveys and social audits (Guess 2005). Much of the planning at the local level
is done at the provincial and municipal/city levels. It is at the barangay level where strategic,
comprehensive and area-based planning is not usually implemented, which is unfortunate
because poverty interventions are targeted at the barangay level. What is submitted as the
barangay development plan is just a listing of projects (Atinc, Ndegwa, Taliercio, MacAntony
and Mailei 2004).
Generally, the central government should be involved with overall policy, setting standards, and
auditing; state governments should have an oversight function; and local governments should be
involved in the provision of infrastructure and services. Assignment of public services to local or
regional governments can be based on factors such as economies of scale, economies of scope
(appropriate bundling of public services to improve efficiency through information and
coordination economies and enhanced accountability through voter participation and cost
recovery), cost-benefit spillovers, proximity to beneficiaries, consumer preferences, and
flexibility in budgetary choices on composition of public spending.
Assignment of
responsibilities to various local governments could be asymmetric, based on population size,
rural-urban classification, and fiscal capacity. Higher levels of government might exercise a
regulatory or policy role, while lower levels of government are responsible for service delivery
(Litvack and Seddon 1998).
22
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26
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27
Sustaining the CCD: Capacitating CCD Technical Secretariat

End of Contract Report
For :
Mr. Raymund Fabre
From :
Dr. Aser B. Javier
Subject:

Capacitating CCD Technical Secretariat on Policy Briefs Preparation
Date:
April 29, 2010
I. Background of the Engagement

The Coordinating Committee on Decentralization (CCD) acts as an inter-governmental
body for coordinating and harmonizing policies and operational activities related to
decentralization and devolution in the Philippines. The DILG, particularly the BLGD
was tasked to act at the Technical Secretariat to the CCD. As part of the functions of the
technical secretariat to the CCD, the DILG-BLGD was tasked to provide policy
papers/policy briefs that will assist the CCD. The policy briefs are envisioned to serve as
background documents to the CCD during deliberation meetings.
A major output of the engagement is the guidance of the CCD Technical Secretariat in
crafting policy briefs on selected policy issues. This focus of the engagement also
expands to the awareness, precision and updating of the policy agenda.
The objectives of the engagement aims to capacitate the DILG BLGD as a Policy Group
as CCD Technical Secretariat. Specifically,
1. To orient the them on the CCD, its mandate and functions, and its roadmap
2. To update them on the prevailing policy issues and concerns on related to
decentralization, and local governments units
3. To assist them develop policy brief /papers to serve as background papers for
deliberation during CCD meetings
II. Methodology
The capacitation in preparation of Policy Briefs was carried out through 1) lectures on the
steps in the policy process and crafting policy briefs; and 2) preparation of a policy
analysis framework that will guide the Policy Group in the definition, generation of
alternatives and setting the policy agenda for the CCD and 3) critiquing of the policy
briefs prepared by the CCD Technical Secretariat.

Lecture and coaching during workshop was done on April 27, 2010 and the critiquing
was done on April 28, 2010. The level of effort allocated to the Policy Consultant is two
(2) person days.
III. Tasks and Deliverables

Task 1. Develop local governance and decentralization policy analysis framework for
presentation to the BLGD Policy Group the Coordinating Committee on
Decentralization Technical Secretariat
To guide in preparing policy briefs, I have structured the public policy analysis process
into three steps- problem definition, alternatives generation and setting the policy agenda.
Step 1 includes the stage of problem identification and policy testing. Step 2 includes the
stage of policy review and policy alternatives generation. Step 3 includes recommending
policies and identification of policy stakeholders. Figure 1, graphically presents the
framework.
Figure 1. Public Policy Analysis Framework
Problem Identification
Problems confronting the
organization
Policy Testing
Is the problem defined a
strategic policy?
Step 1:
Problem Definition
Policy Review
What are the prior efforts
made to solve the policy
problem?
Policy Recommendation
Which among the alternatives
may best solve the problem?
Policy Alternatives
What are the pertinent
courses of action that maybe
taken?
Policy Stakeholders
What are roles of the
stakeholders identified in the
policy recommendation?
Step 2:
Alternatives Generation
Step 3:
Policy Agenda Setting
Task 2. Act as resource person to provide an overview on policy analysis and

development and its practical application by DILG as the oversight agency for local
governments.

As a resource person, I delivered the policy process basics which include the policy
process, basic analysis and alternatives generation. I also provided workshop mechanics
and coaching during the session on policy briefs preparation.
In the presentation of the policy briefs, together with other members of the oversight
agencies, critiquing was provided in to enhance and sharpen the policy issue focus and
identification.
Task 3. Guide BLGD Policy Group in the development of draft policy briefs/outline on
selected policy issues of the CCD
A writing guide in Policy Briefs Preparation was developed to guide the DILG BLGD
Policy Group. It consists of five major sections and contents of each section with
corresponding number of paragraphs were suggested as a policy brief template. Table 1
show the template used in crafting policy briefs.
Table 1 Policy Brief Template
Major Sections
A. Background of the
Policy problem
B. Problem Statement
Number of
Paragraphs/
Pages
Suggested Contents
Describes what is the policy problem and the general scope of problem
the researcher is interested in i.e. decentralization issues in the local
government units.
This section contains the essential facts how the policy problem came
about and the decision maker needs to know about the policy problem
and situation.
2 paragraphs
2 paragraphs
What is the problem related to the theme is the researcher/ author
trying to solve? These are the issues and concerns that the local
government unit or the DILG and other concerned institution are facing
given their scope and mandate, relative to the problem.
This section contains the direct description of the problematic situation.
C. Review of Preexisting Policies

D. Policy Alternatives
What are the policies or prior efforts that have been made to solve the
problem. What is the analysis of the researcher on the policies that have
been made?
3 paragraphs
This section should match the objectives and the problem statement.
What are the possible solutions to the problem, as perceived by the
researcher? What is/are the proposed solution(s) to the issue(s) and
concern(s)? Factor(s) for selecting the said solution(s) over the others?
What are the results of the study?
1 page
This section should ANSWER the objectives and the problem

statement.
E. Concerned
Stakeholders
Who are the major actors in coming up and finalizing the solution?
What are the roles (regulation, facilitation, enabling, direct provision,
1 paragraph

etc) of these actors?

This section describes the stakeholders roles and their point of
integration relative to the LGUs and the researchers viewpoint?
`Maximum Total Number of Pages:
2-3 pages
Task 4. Prepare recommendations to further capacitate the BLGD Policy Group.

The following are the recommendations for an improved Policy Briefs Preparation and
utilization for both the DILG-BLGD as the CCD Secretariat and the Oversight Agencies
as members of the CCD.
1. The major issues which have been identified by various oversight agencies including
the local government leagues represented in the CCD cuts across three types of the policy
process. These are the following:
a. Analycentric- approach focuses on individual problems and its solutions; its scope
is the micro-scale and its problem interpretation is usually of a technical nature.
One good example raised is identified by the BLGF i.e. treasurers competencies.
b. Policy process- its focal point onto political processes and involved stakeholders;
its scope is the meso-scale and its problem interpretation is usually of a political
nature. One good example raised is the creation of cities made by the League of
Cities.
c. Meta-policy approach is a systems and context approach; i.e., its scope is the
macro-scale and its problem interpretation is usually of a structural nature. One
good example raised is the increased resources and access to LGU financing.
The cutting across of the policy issues identified means that the BLGD Policy Group as
the CCD Secretariat will have to be adept with all three types of the policy process.
Capacitation will have to be made in the future on the analysis based on these three types
of the policy process.
2. Oversight agencies and LGUs through the LGU Leagues need to adopt an agreed
upon CCD policy analysis framework in the short-run. This is to provide a
common policy analysis platform among oversight agencies. This is to shape as
early as possible the policy development and analysis culture among oversight
agencies.
3. Oversight agencies and LGUs through the LGU Leagues need to adopt a common
decision criterion to determine policy endorsement, formulation and adoption
among the identified policy issues. This is to provide the foundation for a CCD

collective prioritization of the many major policy issues on decentralization and

local governance it is faced. This is also to avoid the oversight agencies
advocating only policy issues based on their own mandates.
4. Oversight agencies and LGUs through the LGU Leagues should make available
its various officials and staffs who are experts in the policy areas the CCD
Secretariat are writing on. Reference materials for policy analysis in crafting
policy briefs by the CCD Secretariat also need to be made available. This can be
included as part of the CCD operating guidelines, where each of the oversight
committee should provide the necessary knowledge product i.e. previous research,
guidelines, manuals and other available public documents to the CCD Secretariat
prior to the tabling of a policy issue in the deliberation schedule of the CCD.
Corollary to this, related materials for policy development can be made part of the
various databases of the oversight agencies and LGUs through the LGU Leagues
which can easily be accessed not only by the CCD Secretariat but by the publics
as well. This is for easy referencing not only of the BLGD Policy Group but other
researchers interested to do policy studies.
4. Oversight agencies and LGUs through the LGU Leagues can provide access to
cooperation among the members of the academe to be part of the policy
development process as part of the continuing education on policy development.
It can establish a research network to enhance access to information, research
conducted and expertise on subject matter not within the specialization of the
CCD Secretariat. In the long haul the DILG-BLGD will have to develop various
expertises on major issues of the CCD. This has to be matched with the offices
mandate where the policy group members are connected. This can be done by
providing basic online education courses on finance and economic management
which are key issues identified by the oversight agencies.
IV.
Policy Brief Output of the CCD Secretariat
Three policy briefs were prepared by the CCD Secretariat on major policy issues on
Utilization of the Special Education Funds, Defining Corporate Powers of the LGUs and
Operation and Management of Local Economic Enterprises.
Policy Brief 1
Improved Utilization of the Special Education Fund (SEF)
Background of the Problem

The lackluster performance overall of the Philippine basic education subsector in

the last 20 years has been underscored in a number of studies (PPES, EDCOM, etc.) In
fact, many literature and analysis agree that the basic education subsector is in crisis
today. Evidences include decline in enrolment rate from 92.7% in 2000 to 84.8% in 2007
at the elementary level and from 62.3% in to 2000 to 61.9% to 2007 at the secondary
level. At the same time, the outcomes of basic education achievement tests have been
erratic during the period.
The low performance on the education sector could be based on the budget
allocated to the education sector particularly out of the Special Education Fund (SEF).
Problem/Issue Statement
There appears to be a mismatch between what appears to be the actual needs of
the school based on school level data and how the SEF is spent by the LGUs. The SEF
priority currently given to sports competition, infrastructure and other operating expenses
do not contribute to improve school level performance.
Pre-Existing Policies
RA 7160 (LG Code of 1991) gives LGUs access to a financing source, the Special
Education Fund, which is earmarked for the operation and maintenance of public schools.
Because of this, the provision of basic education arguably became the shared
responsibility of the central government and local government units.
The LGC of 1991 contains two provisions that pertain to how the SEF is to be allocated:
1. Section 100 provides that the annual school board budget shall give priority to
the following: Construction, repair, and maintenance of school buildings and
other facilities of public elementary and secondary schools; e The Local
Government Code contains two provisions that pertain to how the SEF is to be
allocated:
2.
Section 100 provides that the annual school board budget shall give priority to
the following: Construction, repair, and maintenance of school buildings and
other facilities of public elementary and secondary schools; Establishment and
maintenance of extension classes where necessary; Sports activities at the
division, district, municipal and barangays levels
Further, Section 272 provides that the proceeds[of the SEF] shall be allocated for the
operation and maintenance of public schools, construction and repair of school buildings,
facilities and equipment, educational research, purchase of books and periodicals, and
sports development as determined and approved by the Local School Board
Republic Act 5447- An Act Creating a Special Education Fund to be Constituted from
the Proceeds of an Additional Real Property Tax and a certain Portion of the Taxes on
Virginia-type cigarettes and duties on imported Leaf Tobacco Defining the Activities to

be Financed, Creating School Boards for the Purpose and Appropriating Funds there
from which took effect in 1969.
Republic Act 9155- Basic Education governance Act of 2001- envisions a different
kind of decentralization in the basic education sub-sector. It calls for the empowerment of
schools in making decisions that improve quality of learning and for the establishment of
school and community networks, emphasizing the need for the greater participation of
parents, teachers and the community itself in the governance of the schools.
Alternatives
The following three (3) alternatives shall be included in the proposed amendments of
Sections 100 and 272 of the LG Code.
Alternative 1- Rules Based Approach
Rules-based approach- involves the joint issuance by the DBM, DepEd and
DILG of new guidelines containing either a positive list type of expenditure items
that may be charged against SEF or a negative list of expenditure items that are
not allowed to be charge against the SEF. Alternatively, the new guidelines may
contain both positive and negative list of expenditure items.
Alternative 2: Market-based Approach
Market-based approach LSBs as the primary entity responsible for determining
annual supplementary budget, may be given full discretion in the allocation of SEF
while support mechanism that enhance planning
and budgeting of the SEF is strengthened. These will promotes greater flexibility of
the LSBs to address the varying needs of the schools at any point in time.
Alternative 3: Harmonization of Legislated Laws
Harmonization of RA 7160 and RA 9155 on the utilization of SEF -key to improving
the utilization of the SEF and better alignment of the provision for the LGC on the
membership in the LSB and the allocation of the SEF
Stakeholders
Parents, teachers and students to participate in policy and decision-making
process
DBM approved LGUs proposed budget on education
DILG and CCD- to formulate and push the implementation of the new guidelines
on the utilization of the SEF
Local School Boards (LSBs) shall be responsible for determining the annual
supplementary budgetary requirements of the public schools in their locality
Department of Education (DepED)- through its regional offices shall see to it that
the LSBs are furnished with copies of the individual schools allocation for the
year from the national budget including programmed school buildings and other
capital outlays

Policy Brief 2
DEFINITION AND EXTENT OF LGU CORPORATE POWER
BACKGROUND OF THE PROBLEM:
The Local Government Code of 1991 (RA7160) provides reference on the
nature, scope and origins of the corporate powers of LGUs e.g. Section 14 sets
the beginning of LGU corporate existence and Section 22 outlines the scope of
the LGUs corporate power. The Code, however, did not explicitly include a clear
definition of what a corporate power is. It merely enumerates an example of
fundamental powers that constitute the exercise of corporate power.
There is no study yet that clearly define corporate powers. What abounds
are case studies of best practices mostly pertaining to extent of LGU borrowing,
revenue generation, management of local economic enterprises, collaborative
undertakings with private sectors among others.
PROBLEM STATEMENT
While the Code set the policy environment necessary for the LGU to
exercise their corporate powers, there is a need to clearly define corporate powers
and the extent of exercising the same to enable the LGU craft strategic policy
directions for implementation of its programs and activities towards attaining
economic development in the context of local autonomy.
This would also allow national agencies concerned to have a clear focus in
assessing the needs of the LGUs and identify necessary and appropriate technical
assistance to enhance the capacity of the LGUs in providing services, leadership
and innovation in the community for economic development.
REVIEW OF PRE-EXISTING POLICIES
Several studies (Pardo and Zipagan, December 2008) on the current trends
of LGU exercise of corporate power had been observed and documented. These
studies dwelt on policies issued by BLGF-DOF regarding LGU borrowing from
government financing institution, bond flotation, and financial performance of
local economic enterprises. Case studies on the emerging models of LGUs
exercise of corporate powers, such as, Inter-Local Cooperation (Partido
development Authority in Cam. Sur created by an act of Congress providing legal
framework for inter-LGU cooperation; Corporatization of Basic Services (La
Union Medical Center an act of Congress corporatizing La Union Provincial
Hospital); Corporatization of Public Utility ( Corporatization of Misamis
Oriental Telephone System (MISORTEL) as initiated by Misamis Oriental
Province to ensure efficiency & viability of MISORTEL. The corporation has

been registered with SEC); Institutionalization of the Operation of Local

Economic Enterprises (Tagum Citys operation of the LEEs (public market,
overland transport integrated terminal, slaughterhouse, public cemetery, cultural
& trade center, and livestock center)
POLICY ALTERNATIVES
1. Review the Implementing Rules and Regulation of RA 7160 particularly Section
22 (Corporate Powers) and other related provisions to include a clear an
unambiguous definition of corporate powers. CCD to undertake consultations,
public hearings, round table discussions and entertain proposals relative to the
amendment of Sec. 22 of RA 7160 setting the powers of a corporate entity should
be consistent with the Philippine Corporation Code.
CCD shall submit a common position on corporate powers to the Oversight
Committee on Devolution recommending amendment to IRR of the LG Code
relative to Sec. 22 to include the parameters and criteria on what should be
included in LGU corporate powers.
2. Conduct of massive and substantial capacity building activities to Local Chief
Executives and functionaries towards understanding LGU corporate powers based
on the current and innovative practices. Current practices may include best
practices on the management of local economic enterprises and inter-local
cooperation and undertakings among others. Innovative practices are a demand
driven practice.
CONCERNED STAKEHOLDERS
The concerned national government agencies, local government units and
other stakeholders that play a vital role in setting the directions on the clear
interpretation and provision of criteria and parameters on the exercise of corporate
powers of the LGUs vis a vis its effective application towards economic
development.
Policy Brief 3
IMPROVING OPERATION AND MANAGEMENT OF LOCAL ECONOMIC
ENTERPRISES
I
BACKGROUND
Local Economic Enterprises (LEEs) are local government owned economic entities that
generate revenues from selling goods and services (DILG, DBM, NEDA , DOF/BLGF).
The character of LEEs has evolved over the years. Traditional LEEs provide municipal
services like markets, slaughterhouses, cemeteries and water services, todays LEEs
include enterprises that produce goods and services that are more in the realm of private

goods (i.e. good and services which are normally provided by the private sector) like
shopping malls, buildings for lease, hotels and recreational facilities.
Manasan and Castel, 2009 identifies three reasons for LGU operation of LEEs. First,
LGUs are looking for more diversified sources of local revenues. Second, LEEs are
desirable because of the need for LGU to have (catalytic investments) in order to generate
greater local economic development. Third, some LGUs operate certain activities because
they have difficulty complying with the Personal Services (PS) expenditure cap in the
local government code.
II.
PROBLEM STATEMENT
LEEs run by LGUs incur losses due to a number of factors: weak institutional support e
LEEs and technical capability, low tariffs, poor collection efficiency. Given the issues
surrounding (1) what policy framework is needed for the effective and efficient
operation and management of LEEs? (2) How can the LGU capacity in operating and
management of LEEs be enhanced to be efficient?
III.
REVIEW OF PRE-EXISTING POLICIES
The DBM UBOM elaborates the rationale and criteria for the establishment and
operation of LEEs: (1) LEE satisfies both the economic and social objectives of the
concerned LGU; (2) It fills in service gaps not adequately provided by the private sector;
(3) It shall operate with a lean and mean staffing complement to satisfy the income
objective of the LEE; (4) It shall operate like a corporate body with a separate strategic
plan and budget.
The LG Code of 1991, the NGAs and the UBOM is generally consistent with World
Banks definition of a state-owned enterprise which refers to government-owned or
government controlled economic entities that generate the weight of their revenues from
selling goods and services (Jones, 1982, World Bank 1998). The definition emphasizes
two distinct characteristics of LEEs namely: public dimension which relates to
government ownership, control and/or management and enterprise dimension which
limits the application of the term to entities that produce marketable outputs such as
goods and services for which prices /fees may be charged.
The LGC of 1991 provides that total appropriations whether annual or
supplemental, for personal services of an LGU shall have a 45%-55% cap. The
appropriations for the PS of such LEEs shall be charged to their respective budgets (Sec
325-a). The preferential treatment given to PS expenditures of LEEs by exempting the
same in the computation of compliance with the PS cap has encourage abuse of the
provision as a cover- up to exceeding the cap.

Also, NGAS emphasizes the importance of maintaining special accounts for

LEEs. This is essential in tracking results of LEE operations and how closely LGUs
follow their intent for establishing LEEs. Under the LG Code. LEEs are part of the
General Fund but special accounts within the General Fund should be maintained for
each LEE.
IV.
POLICY ALTERNATIVES
To resolve the issues pertaining to poor or ineffective operation and management of
LEEs, the following policy alternatives are being proposed:
1. Guidance on Creation of LEEs
The guidance should specify that LEEs should be established by enacting an
ordinance that specifies : (1) LGU policy on degree of cost-recovery ( 2)
classification of LEEs (for service delivery ?or for revenue generation?)
2. Strengthen LGU Capability on LEE Operation and Management
Enterprise Development
9
9
9
Management System
Improvement
9 Establishing a LED Office
Development /evaluation
of FS specially forecasting 9 Provide a clear and legal
regulatory framework for
of demand
LEEs
Supporting PPP
9 Adopt a system of
Considering
forecasting and pricing.
Alternative Methods for
Charges must be based on
Delivering Public
Full Cost Recovery.
Services
9 Tariff setting
Re-defining LEEs in the 9 Collection procedure and
System
context of LED
9 Evaluating alternative
organizational structure
Defining role of the
for the management and
provinces as steward for
monitoring of LEEs
LED
9 Institutionalize a system
for performance
monitoring and evaluation
including organizational
management performance
evaluation and feed
backing
Entrepreneurial Leadership
9
9
9
Professionalizing the LEE

management and Staff
Changing mindsets of
LCEs towards
entrepreneurial approaches
Promotion and marketing
of LEE products and
services
V.
CONCERNED STAKEHOLDERS
The primary stakeholders are 1) LGUs since they are the direct beneficiaries of the
propose policy, 2)NGAs(DOF, DBM, COA, CSC,DILG) since they are the ones who will
provide the policy guidance on improving LEEs operations and management by LGUs.

ICTForum
Discussion
ObjectivesoftheForum
Creationofaninteragencycommitteetotakeon
coordination,knowledgesharing,efficiencyintax
administrationandotherrelevantLGUITappliedtax
relatedfunction;andprovidemoreinputsandcontinuously
improvetheLGUGuideonComputerization;
FormalcreationoftheTWGfortheadoptionofauniform
ICTPoliciesandStandardsfortheNGAsandLGUstoensure
properICTassetmanagementundersecureenvironment;
FutureofapplyingICTinLGUTaxrelatedFunctions.
Approach
PanelDiscussion
BreakoutGroups
PresentationofTopics
SuggestedConvenersandParticipants
Conveners:
DOFBLG
DILG
CICTNCC
Participants:
CCDmembers:DILG,DBM,DOFBLGF,
NEDA,Leagues
DonorAgencies:CIDA,GTZ,ADB,AusAID,
JICA,WB,etc.
OtherNGAs
SuggestedResourceTopicsduringthe
Forum(PresentationProgram)
DiscussionandpromotionoftheLGUGuideto
Computerization BLGF
CICTInitiatives CICT
PhilippineICTRoadMap2010 2015 CICT
ICTResearchorCooperationwithvariousrelated
sector UNorEU
SuggestedResourceTopicsduringthe
Forum(PresentationProgram)
InformationSecurity(CreationofaPolicyon
InformationSecurityinGovernment) NBI
InformationManagement LandSector
DevelopmentparticularlyonValuationandTaxation
LAMP2
Gettingreadyfortheinternetprotocolversion6
NCC
FundingfacilityforLGUTaxRelatedICTInitiatives
ADB,GTZ,CIDA,JICA,WB,etc
MajorPolicyQuestions:
1.Istheresufficientpolicyframeworktoenable
NGAsandLGUstoeffectivelyimplementICT
initiativesinTaxRelatedFunctions?
2.Dowehavesufficientimplementingrulesand
regulationtoguideNGAsandLGUstosupport
thepolicyframework?
IssuesinLGUComputerizationofTax
RelatedFunction
1.
2.
3.
4.
5.
6.
CoordinationofInitiatives
KnowledgeSharing
StandardsandBestPractices
TechnicalAssistance
TechnicalSupport
CodeofConductofITProfessionalsin
Government(andinPrivate)
7. ProfessionalizationofITpractitionersin
Government,etc.
8. NoDataExchangeStandardtosupportlinkages
betweenLGUtoLGU,LGUBLGF,BIR,etc.
9. Datastandardsnotmonitoredandenforced
10.Lowprivatesectorcooperation
11.InsufficientAnalysisToolstosupportfiscalpolicy
reformsinLGUs
12.Nostandarddatasetsorreportformattosupport
managementlevelanalysis
13. NationalLGURealPropertyInformationDatabasefor
broadreviewstosupportpolicyreforms
14. NationalLGUfinancialinformationdatabasefor
broadreviewstosupportpolicyreforms
15. Determinedatasets/statisticalinformationrelevant
toinvestor
16. Informationnotavailabletoinvestorslocallyandin
nationallevel
17. InsufficientinformationtosupportGovernment/LGU
Decision
18. ICTsolutioninLGUtaxrelatedfunctionareunder
utilized
19. NostandardrelevantspatialdatarequiredforLGUtax
relatedfunction
20. Lowfocusonlandvaluationandassessment
21. Bestpracticesormethodstoimprovetaxcollection
efficiencyinLGUs
22. Enhancecooperationwithprivatesectorandprovide
reliableframeworkreferencefortheirplanningand
investmentstrategies
23. Establishorproviderelevantstatisticalinformationfor
specificandbroadinvestmentopportunities
24. Develophumancapitaltoensureproactive,sustainable
andcontinuousimprovementinICTinitiativesinLGUTax
relatedfunctionadvancement
25. ComprehensiveLGUpropertyandfinancialinformation
notavailabletobothgovernmentandpublic.i.e.property
inventory,economicenterpriseinventory,etc.
26. GuidetoLGUsonequitablerevenuepotentialsand
opportunities
27. LowrevenuegenerationeventoLGUswithcomputerized
systems
28. ErroneouspropertyinformationinLGUdatabasesbeing
maintained
29. Nostandardprocedureindealingwithpeculiarproperty
record/situation.i.e.mixeduse,multipleactualuse
30. ICTassets,design,proceduresnotwelldocumented
31.InsufficientDisasterRecoveryPoliciesand
Procedures
32.ServiceslimitedtoPhysicalAccess.Encourage
onlinetransactions
33.Levelofservicesinconsistentacrossagencies
34.Excessiveproceduresintransactions
35.LimitedhighlevelICTexpertiseinLGUs
36.TechnicalresolutionsonICTandTaxrelated
issuesandconcern
ClarificationPointsinreferencetothe3rd CCDMeeting
ontheLGUGuidetoComputerization
1. ThepurposeoftheGuidebookistoprovideinformationand
advicetotheLGUscontemplatingtheprocurement,
developmentorupgradingoftaxrelatedsystems.
2. NCCisamemberoftheTWGoftheguide.Seekingtheinput
ofCICTisalsohighlyrecommended.
3. Thebenchmarkdescribedintheguideisintendedtoensure
thatcriticaldataelementandprocessingthereofwillsupport
BLGFandLGUfunctionalandoutputrequirement.Theguide
doesnotendorseanyproductnorrestrictanyrightsofany
entity,therefore,shouldnotbesubjectedtoanyriskof
criticismorlegalaction.
4. Participationoftheprivatesectorprovidersand
donoragenciesishighlyrecommendedto
ensurewiderparticipationintheadvancement
ofISsolutionsforLGUs.
5. Governmentagenciesareprohibitedfrom
endorsinganyproductorservicesolutionsfrom
anyprivateentitywhetheritisFREEornot.Any
forumshouldencouragecooperationamong
andwithintheindustryandpromotefreetrade
andfaircompetition.
6.Setofminimumstandardshowevercanbeset
byBLGFandCICToranyrelatedagencyonTax
relatedfunctionsofLGUs
7. Thesuggestionofadoptingamiddleware may
notbefeasibleatthistime.Thismayrequire
resources,resolutionondevelopment,
custodiananddataprivacyissues.Whatthe
forumneedshoweverissetdataexchange
standardstoensurethereisacommonkey
acrossallagenciesforpurposeofinformation
exchangeandlinkages.
DiscussionpointsinreferencetotheIssues,Challengesand
NextStepsdiscussedintheTaxForumorganizedbyGTZlast
May27,2008
1. TheconcernsraisedintheTaxForumonthelackof
relevantinformationtoguidetheminadoptingIT
systemsintaxrelatedfunctionsisverymuchvalidandit
isevidentinvariousLGUcomputerizationinthe
country.Thisissuehowever,hadbeengiven
appropriateattentionbytheBLGF.TheLGUguideon
computerizationclearlydiscussestheconsiderationsin
computerization,approaches,featuresand
functionalitiesrequired,theITreadinessassessment
toolandguideonhowtoachievethatreadiness.
2. Thoughtheideaofcreatingorrevivinganinteragency
committeeasavehicleforcoordinatinginitiatives,
knowledgeandresourcesharingisanotherkeyfactorfor
LGUsinefficienttaxadministration.Thishasbeenprovenin
thepastthatsuchinitiativerequiresmorethanwillingness,
commitmentandschedulingofmeetings.Forthisinter
agencycommitteetobesustainable,oneagencythathas
theclearmandatetoaddressthisconcernshouldownthe
functionofregularlycollectinginformation,distributingthe
informationandconductregularmeetingsorforumto
discussvariousissuesofthesubjectmatter.
3.
4.
5.
EnsuringsustainabilityisalreadydiscussedintheLGUguideon
computerization.Thoughitisalsotruethatresourcesharing,
LGUITprofessionalnetworkoranysimilarbigbrotherapproach
fortechnicalsupportisamajorconcern,thissolutionmaynotbe
reliableorensuresquality.
AclearandsuccessfulfactortoensuresustainabilityisforLGUsto
preparetheirISSPsandhaveitapproved,providesufficient
MOOEsforITrequirementsandfollowtheLGUguide.
ITstudentscanbeconsideredhoweverforpurposeofhardware
troubleshootingsupportonly.Studentscannotbeheld
accountableforanypotentiallossordamagetodataorproperty
ofLGUsarisingoutofthatpublicserviceact.ITProfessorscanbe
resortedtobutnothingisfree.
Draft: 30 March 2010
Page 1 of 11
SHORT TO MEDIUM-TERM SCENARIO
A.
Economic:
Slow economic recovery due to uncertain pace of world recovery and fragile
fiscal condition preventing a more vigorous government stimulus program to
push economic growth:
o
o
o
o
Mixed prospects for regions

o
o
B.
Protectionist tendencies in industrial countries with slow

employment recovery
High cost of international finance
Very competitive conditions
Wait-and-see attitude of investors in 2010
Export-dependent regions and provinces (e.g. NCR, Regions 3, 4A

and 7) on the recovery track
Agriculture-dependent areas plagued by drought and possibly La
Nina; face issues related to AFTA implementation and sluggish
demand for sugar
Social
Worsening poverty due to poor agriculture performance
Increasing pressure for social services but NG resources for welfare and
expansionary expenditures are limited
Page 2 of 11
MEDIUM-TERM LGU POLICY LOGFRAME, 2010-2016

Design
Summary
Assumptions
and Risks
Performance
Targets and/or
Indicators
Impact
Social Welfare and
Poverty Reduction at the
Local Level is improved.
__% decline in poverty

incidence by 2016.
Data Sources and/or

Reporting
Mechanisms
NSO, NSCB, DOH, UN
Assumptions
Delivery of Central Government
Goods and Services are
improved.
___% increase in average

life expectancy by 2016.
No major national calamities or

natural disasters in the next five
years.
___% decrease in infant

mortality by 2016.
___% increase in the
Human Development
Index by 2016.
Risks
Another financial crisis occurs in
the next 5 years.
Bad weather may cause
reduction in agricultural growth.
(Note: Outcome + Assumptions
and Risks contribute to Impact)
Outcome
Delivery of Public Goods
and Services at the Local
Level is enhanced.
___ % increase in local

spending In health
services in 70% of all
provinces, cities and
municipalities by 2016.
____% increase in local
spending in road
infrastructure in 70% of all
___%increase in local
spending for other public
infrastructure in 70% of all
____% increase in local
education spending in all
provinces, cities, and
___% increase in local
spending in all provinces,
cities and municipalities
for environmental projects
by 2016.
___provinces, cities and
municipalities passing
environmental measures
by 2016.
___%increase in spending
in all provinces, cities and
NSO, NSCB, DILG, DBM,

DOF, COA, NEDA
Assumptions
Oversight agencies and LGUs
through LGU Leagues are
supportive of the reform agenda
and monitor carefully reform
progress.
Majority of LGUs are open to
having their performance
monitored.
NG provides incentives for good
fiscal and expenditure
performance.
Risks
Incentives for good behavior
insufficient to encourage LGUs
due to lack of available
resources at the national level.
(Note: Outputs + Assumptions
and Risks = Outcome)
Page 3 of 11
municipalities for
economic services by
2016.
NSO, NSCB, DILG, DBM,

DOF, COA, NEDA, HOR,
Senate
Outputs/SubOutputs
1.
Increased resources
and access to
financing for Local
Government Units.
1.1 Efficient, timely,
complete, and
transparent release
of
intergovernmental
fiscal transfers
IRA, Special
Shares, PDF, and
Grants.
1.2 Improved revenues
from local taxes
and user charges.
1.3 Increased revenues
from economic
enterprises and
other non-tax
sources.
1.4 Improved access to
credit financing.
non-traditional
credit financing.
grants and ODA.
2.
Efficient, effective and

transparent planning,
financial, budget and
expenditure
management
2.1 Efficient and
transparent
financial
management and
reporting
2.2. Effective,
responsive,
transparent and
rationalized
planning and
budgeting.
2.3 Efficient and
transparent
expenditure
management.
2.4 Effective and
transparent local
Executive Issuances
Departmental issuances.
Appropriate Legislation
(Republic Act)
___%increase in business
tax revenues in all
____%increase in real
property tax revenues in
all provinces, cities and
___%increase in revenues
from economic enterprises
in all provinces, cities, and
___% increase in the
number of provinces,
accessing credit and nontraditional credit financing
by 2016.
__%increase in the
number of provinces and
municipalities with access
to grants and ODA by
2016.
Executive Issuances,
Appropriate Legislation.
___% decrease in COA
cases by 2016.
___% of provinces, cities
and municipalities
submitting CDP and
CLUP consistent local
plans by 2016.
___% of all provinces,
cities, and municipalities
planning, budgets and
expenditures consistent
by 2016.
____% of all provinces,
submitting regular data to
the LGPMS for at least 3
Assumptions
Roll-out of capacity building is
timely provided by oversight
agencies.
Resources are available for
capacity building.
Executive and Legislature is
supportive of policy reforms.
Risks
Legislature may not prioritize
LGU reform agenda.
Localized calamities and/or
disasters may place undue
burden on available resources
for rescue and rehabilitation.
(Note: Inputs/Activities +
Assumptions and Risks =
Outputs)

performance
management and
monitoring.
Page 4 of 11
years by 2016.
with actively maintained
local database
management systems for
planning and performance
monitoring.
with CBMS by 2016.
conducting annual service
delivery performance
surveys at the barangaylevel by 2016.
3. Efficient, responsive and

accountable local
administration.
3.1. Efficient,
capacitated,
incentivized and
professionalized
local bureaucracy.
3.2. Efficient, timely,
transparent,
responsive,
business-friendly
and performancemeasurable
bureaucratic
processes.
___% decrease in cases

filed by the Ombudsman
for local executives.
___% of all treasurers
passing BLGF
competency exams by
2016.
Assessors in ___% of
municipalities passed
accreditation exams by
2016.
___ provinces, cities and
municipalities
implementing businessfriendly measures.
___ provinces, cities and
municipalities utilizing
service delivery contracts
and customer service
surveys by 2106.
4. Rationalized and timebound process of fiscal

decentralization.
4.1 Rationalized
process of
devolving functions
and adequate
resources and
revenue generating
powers based on
local capacities.
4.2 Realistic time-table
for devolving
functions and
resources to
appropriate LGU
Studies completed.
Multi-sectoral
consultations conducted
and agreements reached
and documented.
___ LGUs pilot-tested for
phased decentralization
by 2016.
Page 5 of 11
levels.
4.3 Accurate monitoring
and measurement
of the impact and
performance of
devolving functions
and resources.
Inputs/Activities
1.1.1. Drafting and issuance of IRRs and Joint Memorandum Circulars between
DBM and concerned agencies for the LGUs special shares harmonizing and
streamlining the procedures and schedules for the submission of information
for the computation and release of the LGUs special shares. (PC/PR)
1.1.2. Reconsider the target date for the submission of the estimates (i.e., between
March 15 and May 15) and adopt a common date as suited within the DBM
budget preparation timeframe.(PC)
1.1.3. Review and revise policy to allow barangays where the income for the
special share is being generated a portion of the mother LGUs share and
include these barangays in the DILG Master List. (PR/PC)
1.1.4. Widely disseminate, especially to central government sub-units, the basic
data and information used in the computation of the shares, besides the
DILG Master List of LGUs, the NSO Census of Population adopted under a
Proclamation Order and the LMB Certified Master List of Land Area. If
necessary, issue a memorandum of understanding to institutionalize this
arrangement. (PC)
1.1.5. Disallow the use of unofficial sources for the computation of the special
shares. (PR/PC)
1.1.6. Provide in the annual National Expenditure Program an amount under the
Allocation to Local Government Units based on the robust estimates
submitted by the revenue collecting agencies for the particular special
share: BIR, for mining taxes; DOE, for energy resources production; DENR,
for forest charges; and MGB, for royalties from mineral products for the
share from the utilization and development of national wealth; and other
collecting agencies concerned, for the Tobacco Excise Tax, Ecozones, VAT,
Franchise Tax, as well as taxes from mini-hydroelectric power developers.
(PC)
1.1.7. Avoid giving preliminary or unofficial information to the, as there is always
the possibility that the advance information given to the LGUs would not
match the figures finally released. (PC)
1.1.8. Coordinate with the LGUs and other key agencies (e.g., BIR) for the
information needed to compute problematic special shares such as the
incremental VAT. (PC)
1.1.9. Apply the policy on the programming of funds for the release of LGU shares
to the shares from this tax in order to avoid the additional step of getting a
referral from the OP. (PC)
1.1.10. Provide or disseminate information on the established policy for the
prioritization of the arrearages (aging, type of special share) before the
releases were made , including to LGUs with claims for the years
immediately after the issuance of the LGC or for those years before the
issuance of the pertinent implementing guidelines. (PC)
1.1.11. Clarify the role of the Regional Offices in processing of the release
documents. DBM ROCS shall continue consolidating and integrating the
regional dimensions of the special shares for prioritizing/programming
purposes. It shall be responsible for preparing the instruments in seeking
clearance/approval for the release where needed. It should not, however,
involve itself, and by extension the DBM ROs, in the computation of the
shares, but rather leave this to the collecting agencies as their full
responsibility. (PC)
1.1.12. Determine the shortest time it would be able to process the release of the
shares to the LGUs. As an alternative, a schedule could be agreed upon
among the agencies concerned, as to when all of the needed documentation
can be submitted to DBM for a one time processing and release. (PC)
1.2.1.
1.3.1. Adoption of the oversight agencies (DBM, DOF/ BLGF, DILG, NEDA) of a
Responsible
Agencies/Resources
DBM, BIR, DILG, DENR, MGB,
DA, DOE.
DBM
DILG
DBM, LMB, DILG, NSO
DBM
DBM
DBM
DBM, LGU Leagues, BIR
DBM, OP
DBM
DBM
DBM
DILG, DBM, DOF, BLGF, NEDA
1.3.2.
1.3.3.
1.3.4.
1.3.5.
1.3.6.
common definition of the term local economic enterprise emphasizing

enterprise dimension. In this regard, the definition of Jones (1982) and the
World Bank (1995) may be adopted: LEEs are local government owned
economic entities that generate the bulk of their revenues from selling goods
and services. (PR)
Establish a clearer and more comprehensive policy framework to govern the
creation of new LEEs. Although, many of the elements of the existing
framework will still be part of the new framework, a number of new features
will have to be put in place. First, the new policy framework should be
anchored on the basic principle that LGUs need to focus on their core
functions and premised on the superiority of private-sector led development
unless a strong case can be made for government intervention. Second, the
new policy framework should also provide LGUs guidance on the criteria
that they may use in analyzing the advantages/ disadvantages of using
external organizations to deliver public services as opposed to direct service
delivery by the LGU itself. Third, the new policy framework should reiterate
and re-emphasize the importance of the maintenance of special accounts
for LEEs as prescribed by the COA under the NGAS. (PR)
Conduct an information dissemination/ advocacy campaign targeted to LGU
and oversight agencies officials in order to generate better appreciation and
understanding of the new policy framework for LEEs. (PW)
Develop a policy framework to govern the exercise of LGUs corporate
powers by conducting the following activities: (PW)
o Review existing policies on LGUs exercise of corporate powers
o Identify areas of reform
o Organize consultative workshops
o Formulate appropriate policies
o Review and approve proposed policies by the Coordinating Council
for LGU Corporate Powers (CCLCP)
o Issue appropriate guidelines by BLGD-DILG (for policies that can be
promulgated through Administrative Issuances).
o Draft the proposed legislation for policies that would need
Congressional Action.
Create and institutionalize the Coordinating Council for LGU Corporate
Powers (CCLCP). (PR)
Enhance LGU capabilities in the proper exercise of their corporate powers
through the following activities: (PW)
o
o
o
o
o
o
o
o
o
Page 6 of 11
DILG, DBM, BLGF, NEDA
DILG
DILG
DILG, NEDA, DOF, DBM, DTI,

DOJ, DA, TESDA, ULAP, PCCI
LGA
Conduct surveys to determine/identify training needs on local

enterprise management and ,public-private partnerships
Develop the training design and appropriate capacity building
interventions
Develop and print training materials
Conduct Central Office (CO) and Regional Office (RO) staff training
workshop on LGUs corporate powers
Implement RO roll-out to provinces and cities
Develop orientation and promotional materials on LGUs corporate
powers for municipalities
Implement Roll-out to municipalities (c/o LGU)
Document and compile best practices/models in LGUs exercise of
corporate powers (Kaban Galing and Galing Pook)
Replicate best practices/models in LGUs exercise of corporate
powersGood Governance-Facility for Adoption and Replication (GOFAR)through mentoring and coaching in collaboration with OPDS
[P500,000 per model]
1.3.7.
1.4.1.
1.4.2.
1.4.3.
Study why LGUs in some regions have much fewer loans. Is it a matter of
preference or need (demand factors) or lack of access or accessibility
(supply limitations)? (PW)
Simplify loan eligibility requirements and streamline loan approval process
and develop templates for on-lending facilities of the GFIs to reduce project
development costs. (PR)
Clarify NG policy on the role of private sector financing for LGUs. (PW/PR)
DILG, DOF, NEDA
DOF, MDFO, DILG
DOF

1.4.4.
Page 7 of 11
Conduct programs that would develop capacity at the LGU level to prepare
and operate projects that would be suitable for ODA and for commercial
financing. (PW)
1.4.5. Strengthen MDFOs operational capacity to support LGU financing by
approving the proposal to make it an Attached Agency of DOF and
approving its rationalization plan. (PW/PR)
1.4.6. Set up an MDFO website for greater transparency and to widen the reach of
the facility. (PW)
1.4.7. Evaluate the NG-LGU cost sharing policy, pilot-test the performance-based
incentive policy and finalize design of the performance-based grant system
which should include third-party assessments of performance and
creditworthiness of the LGU borrower. (PR)
1.4.8. Enjoin MDFO to continue initiatives for mobilizing private capital for LGU
projects. (PC)
1.4.9. Require BLGF and DILG to enhance initiatives for disseminating
information about LGUs creditworthiness and achievements. (PW)
1.4.10. Simplify loan eligibility requirements and streamline loan approval process
and develop templates for on-lending facilities of the MDFO to reduce
project development costs. (PC)
1.4.11. Facilitate the availability of a pool of consultants who can assist LGUs in
preparing application requirements for MDFO project loans. (PW)
BLGF, DILG
1.5.1.
DOF
1.5.2.
1.5.3.
1.5.4.
1.6.1.
Study and implement policies to re-invigorate the LGU bond market.

(PW/PR)
Implement the program for sub-sovereign lending Executive Order 809.
(PR)
Design and implement a project development and financing framework for
LGUs intending to exercise their corporate powers which have but are not
limited to the following features: (PW)
o Assist in packaging proposed LEEs for possible funding
o Provide technical assistance in project identification, pre-feasibility
study, and assessment of both financial and technical viability
o Assist LGUs in identifying various options for the operation of LEEs
o Assist LGUs in identifying appropriate options for financing and service
delivery under the principle of public-private partnership
o Document good practices on LGUs exercise of corporate powers in
collaboration with LGA
o Replicate models on LGUs exercise of corporate powers in
collaboration with LGA [P500,000 per model as per GO-FAR].
o Commission a corporate lawyer/consultant to draw a legal roadmap on
how to engage in public-private partnership on certain LGU service
deliveries
Establish the LGU Corporate Powers Challenge Fund with a capitalization of
P300 million where 10% would be used for capacity building and 90% as a
grant. (PR)
Review the pricing of ODA funds provided to GFIs including whether GFIs
should bear the foreign exchange risk. (PR)
1.6.2. Finance income-generating projects of LGUs with the internal funds of the
GFIs and even by the PFIs and study whether donor funds should still be
used for these projects. (PR)
1.6.3. Clarify government policy on the use of ODA for LGUs towards
complementing NG and private sector resources instead of competing. (PR)
1.6.4. Develop and implement a policy where concessional ODA is directed
towards the sectors that need it most. (PR)
1.6.5. Ask the donors to design and program projects that would leverage ODA
funds destined for LGUs with domestic commercial financing. (PR)
1.6.6. Issue and implement a policy where for projects requiring longer term
financing, where PFIs or other commercial finance is potentially available
(perhaps with the support of MDFO or LGUGC), GFIs and other government
lending institutions should not use ODA funds to compete with these private
funding. (PR)
1.6.7. Issue and implement a policy which would require that ODA funds will not be
used for projects that require financing for ten (10) years of less in order not
DOF
MDFO
DOF, NEDA,
NEDA
DBM,
MDFO
BLGF, DILG
MDFO
MDFO
DOF
DOF, BLGF, MDFO, DILG
DOF, DBM, DILG, MDFO
DOF, NEDA
DOF
DOF, NEDA
DOF, NEDA
DOF, NEDA, DILG
DOF
DOF, NEDA
DILG,
1.6.8.
1.6.9.
1.6.10.
1.6.11.
1.6.12.
1.6.13.
1.6.14.
2.1.1.
2.1.2.
2.1.3.
to compete with the private sector. (PR)

Issue and implement a policy that even where there is no commercial
financing interest in longer term LGU projects, ODA project design should
seek to leverage the internal funds of GFIs and other government lending
institutions and to allow the LGU borrowers to benefit as much as possible
from the long tenor of ODA funds. (PR)
Rationalize grants and lending facilities in order to avoid unwanted
competition with private sources. (PR)
Conduct programs that would develop capacity at the LGU level to prepare
financing. (PW)
Establish a monitoring system between NEDA, DILG, and DOF for ODAfunded local government projects. (PC)
Promote PDAF and CIs as budgetary sources for local projects. (PR)
Encourage LGU participation in Regional Development Councils. (PC)
Facilitate the representation of or invite LGUs to observe and/or participate
in bilateral and multilateral donor consultations on country programming.
(PC)
Implement a training module on revenue mobilization developed under ADB
TA 4778. (PW)
Improve LGU capacity in operating LEEs in the following areas: (PW)
evaluating alternative modes of public-private partnerships
evaluating when to create new LEEs or when to continue operations of

existing ones
drafting of ordinances for the creation of new LEEs including

formulation of subvention policy
improving LEE operations

development/ evaluation of feasibility studies, especially
forecasting of demand
tariff setting
collection procedures and systems
evaluating alternative organizational structures for the
management and monitoring of LEEs
conduct of periodic review of existing LEEs
evaluating alternative divestment modes.

Increase technical and concessional financial assistance to improve revenue
generation and project prioritization and preparation. (PW)
2.2.1. Divide the budget into three parts. Part 1 will show the income estimates
and spending proposals (including subsidy to LEE) for the General Fund
Proper. Part 2 will show the income estimate and spending proposal for the
LEE. This implies that Sanggunian authorization for LEE spending is
required. Part 3 will show the consolidation of Parts 1 and 2. This budget
format is not only more transparent than current practice, it also provides
incentives for LEE managers to improve their collections since they are
better able to isolate their earnings from the rest of the General Fund
Proper. (PR)
2.2.2. Implement simple spreadsheet models for cash flow forecasting and cash
flow analysis have been developed by Manasan (2006). Two, establish
benchmarks against which LGUs can compare the results of their cash flow
forecasts and cash flow analysis to aid their decision making process as to
the timing of the release of reserves, revisiting the revenue generation
strategies of the LGU, and revising the methodology for revenue forecasting.
Three, provide guidance on what steps LGUs need to take in the event of an
impending fiscal deficit. For example, is there need for Sanggunian action or
resolution authorizing the local chief executive to reduce allotments without
need for further consultation with the Sanggunian once it is established that
actual revenues for the fiscal year will be lower than the estimates of income
that were used in preparing the budget? Are the existing guidelines
pertaining to the allotment system not enough to address this problem?
(PW)
2.2.3. Develop and implement approaches to forecasting the amount available for
appropriation in the current year so that this estimate can be included in the
preparation of the budget for the incoming year. These approaches would
involve the close monitoring of cash flows and utilization/ obligation of
appropriations and allotments which are prescribed in the UBOM and the
Page 8 of 11
DOF, NEDA
DOF, NEDA
BLGF, DILG
NEDA, DOF, DILG

BLGF, DILG, NEDA
NEDA
NEDA
BLGF
BLGF, DILG
BLGF, DILG
DBM
DBM
DBM
2.2.4.
2.2.5.
2.3.1.
2.3.2.
2.3.3.
2.3.4.
2.3.5.
2.3.6.
NGAS even now. Implement simple spreadsheet models for cash flow
forecasting and cash flow analysis have been developed by Manasan
(2006). (PW)
Establish benchmarks against which LGUs can compare the results of their
cash flow forecasts and cash flow analysis to aid their decision making
process as to the timing of the release of reserves, revisiting the revenue
generation strategies of the LGU, and revising the methodology for revenue
forecasting. Three, provide guidance on what steps LGUs need to take in
the event of an impending fiscal deficit. For example, is there need for
Sanggunian action or resolution authorizing the local chief executive to
reduce allotments without need for further consultation with the Sanggunian
once it is established that actual revenues for the fiscal year will be lower
than the estimates of income that were used in preparing the budget? Are
the existing guidelines pertaining to the allotment system not enough to
address this problem? (PC)
Develop and disseminate a handbook to complement the UBOM. The
handbook should aim (i) to communicate a policy framework for LGU
budgeting that is anchored on the basic principles of public expenditure
management, and (ii) to provide LGUs with tools and techniques that will
help them incorporate these tenets in their budget processes. (PW)
Page 9 of 11
DBM
DBM
Enhance the efficiency and effectiveness of the utilization of the SEF by

improving the existing guidelines that govern SEF allocation. Corrective
action/s in this regard may a rules-based approach. It involves the joint
issuance by the DBM, DepEd and DILG of new guidelines containing either
a positive list of type of expenditure items that may be charged against the
SEF or a negative list of expenditure items that are not allowed to be
charged against the SEF. Alternatively, the new guidelines may contain
both a positive list and a negative list of expenditure items. (PW)
Establish a clearer connection between the various instruments and
protocols in the BEIS and the BESRA like the teacher deployment analysis
and the school improvement plan, on the one hand, and LSB allocation
process, on the other hand. (PC)
Re-think DepEd representation in the municipal school boards (MSBs) and
expand the LSB membership to include NGOs, business chambers, and
private schools as non-voting members has been found to beneficial in
terms of expanding the pool of allies and advocates, in tapping expertise
available outside of the traditional LSB membership, and in securing
additional resources for the schools. Include the local budget officer in the
LSB will ensure a more symmetrical treatment of the SEF relative to the
General Fund and consequently budget execution. This will help promote
better financial management in the utilization of the SEF.(PR)
Delineate the line that separate school sports and physical fitness from
sports development/ sports competition. This clarification is needed because
many division superintendents and district supervisors interpret the
provisions of the LGC to mean that participation in the barangay, district,
division, regional and national level of the Palarong Pambansa should be
one of the priorities of the SEF especially in the light of schools continued
mandate from the DepEd to participate in the Palaro Pambansa but with
little or no budgetary support from the central government. (PR)
Given the existing policy on centralized textbook procurement, de-list
textbooks from the list of expenditure items chargeable against the SEF.
(PR)
Retain the favourable treatment given to the personal services spending of
LEEs as provided under Section 325 (a). But limit its application to LEEs
which are created by ordinance and which have well articulated policies on
cost recovery. (PR)
DBM
Include in the fiscal performance indicators in the Local Governance

Performance Management System the current fiscal balance as a measure
of LGU savings and its contribution to the pool of resources that is available
for investment. This measure can be read off easily from the COA
Statement of Cash Flows. (PC)
Develop objective measures for the performance of LGUs in the exercise of
their corporate powers through the following activities: (PW)
BLGS
DBM
DBM, DepEd
DBM, DepEd
DBM, DepEd
DBM, DILG
2.3.7.
2.4.1.
2.4.2.
BLGD

o
o
o
o
o
Page 10 of 11
Develop performance indicators on LGUs exercise of corporate

powers
Establish performance standards for LEEs (benchmarking)
Monitor LGU performance against the indicators
Monitor LGU compliance with DILG guidelines on LGUs exercise of
corporate powers
Summarize findings for management purposes
3.1.1. Review and define model organizational structures for LGUs with
corresponding staffing pattern (by level and by income class) with the
amended model organization structures should be indicative rather than
prescriptive. The model staffing patterns may indicate minimum and
maximum number and level of positions for each LGU level and income
class. There is also a need to establish criteria and/ or benchmarks that
LGUs can refer to in deciding on the staffing pattern that is appropriate for
their particular situation. Fixed-term employment contracts may then be
considered for personnel who are focused on the delivery of the priorities of
the current administration but which are not part of the core mandates of the
LGU. The tenure of department heads and heads of the various offices may
also have to be revisited, weighing the trade-off between the need for
personnel who have the full trust and confidence of the LCE, on the one
hand, and the need to promote continuity in public administration at the local
level, on the other hand. (PW)
3.1.2. Provide a wage that will be commensurate to the work required and
motivating for a public servant. (PR)
3.1.3. Retain the PS cap. This recommendation is anchored on the premise that
service delivery requires a mix of both wage and non-wage spending. If
spending is too skewed in favor of personal services, service delivery suffers
because of the squeeze on supplies, travel and other resources that are
needed to complement personnel resources as well as local public
infrastructure needed for local economic development. (PR)
3.1.4. Allow the LGUs the discretion to choose any which one of the eight
alternative salary schedules which is provided in Section 10 of RA 6758 and
what they think is best suited to their particular situation guided by their
fiscal capacity and subject to their complying strictly with the PS cap. In line
with this, it is also recommend that most if not all of the waivers to the
application of the PS cap be eliminated. The presence of these waivers
seriously undermines fiscal discipline. (PR)
3.1.5. Revisit the parameters that form the basis for assigning different salary
grades for higher level positions in LGUs of different income class and
different levels. (PW)
3.1.6. Coordinate the implementation of benefits under various Magna Carta
legislations with implementation of the overall compensation structure of
government, especially under SSL3. Congress should revisit the desirability
of grant of Magna Carta-type MC benefits to all government employees
instead of special groups only. The desire to provide higher pay to public
health workers, particularly doctors and nurses, who are deemed to be
underpaid relative to the demand for their services in the local as well as
foreign labor markets is understandable. This concern might be addressed
better by adjusting the salary grades that currently assigned to these
positions instead of providing blanket salary top-ups to all PHWs. Moreover,
the experience with the implementation Magna Carta of PHWs shows that
legislation of this type can be counterproductive. (PW)
3.1.7. Discontinue the practice of granting additional/ extra year-end benefits
subject to the availability of funds at the level of the operating unit as the
budget year is about to come to a close in order to improve public
expenditure management at the local level. (PR)
3.1.8. Amend the pertinent section of the LGC to disallow the grant of additional
allowances and benefits to national government officials. This provision puts
undue pressure on LGUs to provide such allowances at the expense of local
service delivery. (PR)
3.1.9. Conduct programs that would develop capacity at the LGU level to prepare
financing. (PW)
3.1.10. Forge a partnership between the DILGs Local Government Academy and
other training institutions to ensure accessibility of training services. (PW)
DILG, LGU Leagues
DBM, DILG, CSC

DBM
DBM, CSC, DILG
DBM, CSC, DILG
DBM, CSC, DILG
DBM
DBM
DILG, BLGF
LGA, DILG
3.2.1.
4.1.1.
4.2.1.
4.3.1.
Notes:
PC
PR
PW
Procedural Changes
Policy Reform
Preparatory Work
BIR
BLGD
BLGF
BLGS
DA
DBM
DENR
DepEd
DILG
DOE
DOF
DOJ
DTI
COA
CSC
LnB
LCP
LGA
LMB
LMP
LPP
MDFO
MGB
NEDA
NSCB
NSO
PCCI
TESDA
ULAP
Bureau of Internal Revenue

Bureau of Local Government Development
Bureau of Local Government Finance
Bureau of Local Government Supervision
Department of Agriculture
Department of Budget and Management
Department of the Environment and Natural Resources
Department of Education
Department of the Interior and Local Government
Department of Energy
Department of Finance
Department of Justice
Department of Trade and Industry
Commission on Audit
Civil Service Commission
Liga ng mga Barangay
League of Cities of the Philippines
Local Government Academy
Land Management Bureau
League of Municipalities of the Philippines
League of Provinces of the Philippines
Municipal Development Fund Office
Mines and Geosciences Bureau
National Economic and Development Authority
National Statistics Coordinating Board
National Statistics Office
Philippine Chamber of Commerce and Industry
Technical Education and Skills Development Authority
Union of Local Authorities of the Philippines
LGU Leagues -
LPP, LMP, LCP, LnB, ULAP
Page 11 of 11
PolicyBriefPreparation
CoordinatingCommitteeonDecentralization
AserB.Javier,PhD
WhatisaPolicyBrief?
Apolicybrief isawrittendocumentanda
positionpaperthatclearlystatetheposition
oropinionofanorganization(oracoalitionof
organizations)aboutaparticularissue.
Source: William Dunn, Public Policy Analysis: An Introduction
PublicPolicyAnalysisFramework
ProblemIdentification
Problemsconfronting
theorganization
PolicyTesting
Istheproblemdefineda
astrategicpolicy?
Step1:
ProblemDefinition
PolicyReview
Whatarethepriorefforts
madetosolvethepolicy
problem
PolicyRecommendation
Whichamongthe
alternativesmaybestsolve
theproblem?
PolicyAlternatives
Whatarethepertinent
coursesofactionthat
maybetaken?
PolicyStakeholders
Whatarerolesofthe
stakeholdersidentifiedin
thepolicy
recommendation?
Step2:
AlternativesGeneration
Step3:
PolicyAgendaSetting
PolicyIdentification
Source:AnadaptationfromtheLocalGovernmentResourceHandbook,October2000
What are the issues confronting the

organization? What's wrong?
Who considers this to be an issue?
What are the consequences of not
addressing this issue?
Policy Problem Testing Worksheet

Policy problem:
When
will this
issue
confront
How broad
of an
impact will
these
the office? issues
have on
1.Immediat
the office?
e
2.next year
3.three
years from
now?
1.Entire
DILG
2.Division/Bur
eau
3. Single unit,
What
impact will
this issue
have on
the
offices
financial
resources
? 1.Major,
How
sensitive
is the
policy
issue
relative
to the
environm
ent?
Will
solution
require
improve
ments in
staff
compete
ncy?
2.Moderate,
3.Minor
1.Major,
2.Moderate
, 3.Minor
2.No
1.Yes
Will
solution
require
major
facility
constructi
on/
renovatio
n?
1.Yes
2.No
What level
of
manag
ement
can
the
issue
be
resolv
ed?
1.Secretary
2.Director
3.Chief
Divide total score by 7. Those issues between 1-1.25

are strategic policy issues.
PreExistingPolicy
Reviewstheexistingpoliciesthatwasintendedto
solvethepolicyproblem
Summarizeswhathasbeendonebytheothersand
theclientorganizationtosolvethepolicyproblem
PolicyAlternatives
Source:AnadaptationfromtheLocalGovernmentResourceHandbook,October2000
1. Whatarethepracticalalternativestheorganization
mightpursuetoaddressthispolicyissue?
2. Whatarethebarrierstotherealizationofthese
policyalternatives?
3. Whatarethemajorproposalstoachievethe
alternativesorovercomethebarriers?
StepsinIdentifyingPolicyAlternatives
1.Itisthedevelopmentofpertinentand
acceptableproposedcoursesofactionsfor
dealingwithpublicproblems.
2.Itaskstwomajorquestions:(1)whatshould
bedoneaboutaproblem?(2)Howshould
theactivities,proposedcoursesofaction
agreeduponprinciplesorstatements
drafted?
ElementsofaPolicyBrief
Source:AnadaptationfromProf.Tsai,2005andW.Dunn,PublicPolicyAnalysis:AnIntroduction
Elementsofa
PolicyBrief
Content
1.Background 1.Containsthe
ofthe
descriptionofthe
Problem
problematic
situation,the
outcomesofprior
effortstoresolve
theproblem.
2.Containsessential
factsadecision
makerneedsto
know.
GuideQuestions
1.Arethedimensions
ofthe
problematic
situation
described?
2.Haveoutcomesof
prior
efforts/policyto
resolvethe
problems
described?
Elements of a Policy Brief

Source: An adaptation from Prof. Tsai, 2005 and W. Dunn, Public Policy Analysis: An Introduction
Elementsofa Content
PolicyBrief
2.Problem/
Issue
Statement
Problemstatementsrefer
toa"problem"tobe
solved.
1. Aconcisestatementof
thequestionthatyour
policytackles;
2. Justification,bydirect
referencetothe
previoussection,that
yourquestionis
previouslyunanswered
GuideQuestions
1.Istheproblem
clearlystated?
2.Aregoalsclearly
specified?
4.Areallmajor
stakeholders
identified
5.Istheproblematic
situations
analyzed?

Elementsofa Content
GuideQuestions
PolicyBrief
3.Preexisting 1. Summarizeswhat
1.Whatarethe
Policies
hasbeendonebythe
interventions
othersandtheclient
madeandwhat
organization.
aretheactions
pursued?
2. Theobjectiveisto
informthereaders
thatpolicyoptions
havealreadybeen
pursued,ifany.

Elementsofa
PolicyBrief
Content
GuideQuestions
4.Policy
Alternatives
1.Arealternativepolicy
1.Thispartofthepolicy
solutionsdescribed
paperistoconvince
andspecified?
thedecisionmakers
thatyouansweredor 2.Areallrelevant
solvedtheproblem.
constraintstaken
2.Thispartdelineatesthe
intoaccount?
possiblecoursesof
3.Arepossible
actiontheclient
consequencestaken
organizationmaytake.
intoaccount?
4.Arestrategieslaidout
tosolvethe
problem?

Elementsofa
PolicyBrief
Content
GuideQuestions
5.
Stakeholders
1.Thispartcontainsthe
identificationofthe
stakeholderstobe
affectedbyyour
policy
1.
Whoarethe
affectedparties
ofyourpolicy?
Guide to Writing Policy Briefs

Objectives: Capacitate the DILG Policy Group to act as CCD Technical Secretariat to develop policy brief /papers on
decentralization and local governance to serve as background papers for deliberation during CCD meetings.
Major Sections
A. Background of the
Policy problem
B. Problem
Statement
C. Review of Preexisting Policies
Suggested Contents
Describes what is the policy problem and the general scope of problem the
researcher is interested in i.e. decentralization issues in the local government
units. This section contains the essential facts how the policy problem came
about and the decision maker needs to know about the policy problem and
situation.
What is the problem related to the theme is the researcher/ author trying to solve?
These are the issues and concerns that the local government unit or the DILG
and other concerned institution are facing given their scope and mandate,
relative to the problem. This section contains the direct description of the
problematic situation.
What are the policies or prior efforts that have been made to solve the problem.
What is the analysis of the researcher on the policies that have been made?
This section should match the objectives and the problem statement.
D. Policy Alternatives
What are the possible solutions to the problem, as perceived by the researcher?
What is/are the proposed solution(s) to the issue(s) and concern(s)? Factor(s)
for selecting the said solution(s) over the others? What are the results of the
study? This section should ANSWER the objectives and the problem
statement.
E. Concerned
Stakeholders
Who are the major actors in coming up and finalizing the solution? What are the
roles (regulation, facilitation, enabling, direct provision, etc) of these actors?
This section describes the stakeholders roles and their point of integration
relative to the LGUs and the researchers viewpoint?
Number of
Pages
2 paragraphs
2 paragraphs
3 paragraphs
1 page
1 paragraph
9 Functions of a Secretariat
9 Preparing Minutes of the
Meeting
9 Agenda Setting
Functions of a Secretariat
Technical
Administrative
Technical
Support to meetings
Preparation of the minutes
Agenda setting
Preparation of technical documents for the agenda
folder
Implementation of the decisions of the CCD

Monitoring/tracking of agreements during meetings
Coordination and monitoring of CCD Workplan
Technical
Initiation of studies and research related to

programmes for the most appropriate,
expeditious and efficient ways of achieving
the objectives of the CCD
Administrative
Logistical Support
Word processing, filing and telephone/fax
services
Preparation (compilation and packaging) of
agenda folders
Preparing Minutes of the Meeting

Proposed Template

Some Pointers
For Processing Information
Difficulty funneling information or

discussions? Write down everything sort,
right after the meeting.
Always take the cue from the chairman
especially for the agreements.
Anything the chairman picks up for discussion
should be reflected in the minutes.

Some Pointers
For Processing Information
There are discussions that should not be

explicitly noted in the minutes
For tracking/monitoring assignments, state in
positive tone non compliance of members.
Matters Arising from Previous Meeting cover
items that may need follow through
discussions or activities and should be
included in the activities that the secretariat
should monitor or undertake.

Some Pointers
Use the agenda as guide or outline in
taking down notes.
Do not discard notes, even marginal notes
on papers until the minutes have been
approved. Set your own envelope for each
meeting.
Use tapes, or electronic recorders as back
up.
Agenda Setting
How do you go about identifying the list of
items for the agenda for the CCD meetings?
Minutes of the meeting
CCD Workplan
Policy dialogue group specifically the
oversight agency technical working
group and the local government
dialogue partners
Directions from the Chairman
PROPOSEDLGUMEDIUM
TERMLOGFRAME,20102016
ADBTA7019PHI
REVISEDVERSION:30MARCH2010
LOGFRAMESTRUCUTURE
IMPACT
Assumption
s
Risks
OUTCOME
Assumptions
Risks
OUTPUTS
Assumption
s
Risks
INPUTS/
ACTIVITIES
SHORTTOMEDIUMTERMSCENARIO
Economic:
A.
y
y
Sloweconomicrecoveryduetouncertainpaceofworldrecoveryand
fragilefiscalconditionpreventingamorevigorousgovernmentstimulus
programtopusheconomicgrowth:
Protectionisttendenciesinindustrialcountrieswithslowemploymentrecovery
Highcostofinternationalfinance
Verycompetitiveconditions
Waitandseeattitudeofinvestorsin2010
y
y
Mixedprospectsforregions
y
Exportdependentregionsandprovinces(e.g.NCR,Regions3,4Aand7)onthe
recoverytrack
AgriculturedependentareasplaguedbydroughtandpossiblyLaNina;faceissues
relatedtoAFTAimplementationandsluggishdemandforsugar
SHORTTOMEDIUMTERMSCENARIO
B. Social
y Worseningpovertyduetopooragricultureperformance
y IncreasingpressureforsocialservicesbutNGresourcesforwelfare
andexpansionaryexpendituresarelimited
IMPACT
y SocialWelfareandReducedPovertyattheLocal
Levelisimproved.
Assumptions
DeliveryofCentralGovernmentGoodsandServicesare
improved.
Nomajornationalcalamitiesornaturaldisastersinthenext
fiveyears.
Risks
Anotherfinancialcrisisoccursinthenext5years.
Badweathermaycausereductioninagriculturalgrowth.
IMPACT:PROPOSEDINDICATORS
__%declineinpovertyincidenceby2016.
___%increaseinaveragelifeexpectancyby2016.
___%decreaseininfantmortalityby2016.
___%increaseintheHumanDevelopmentIndex
by2016.
OUTCOME
y DeliveryofPublicGoodsandServicesattheLocal
Levelisenhanced.
Assumptions
OversightagenciesandLGUsthroughLGULeaguesare
supportiveofthereformagendaandmonitorcarefullyreform
progress.
MajorityofLGUsareopentohavingtheirperformance
monitored.
NGprovidesincentivesforgoodfiscalandexpenditure
performance.
Risks
IncentivesforgoodbehaviorinsufficienttoencourageLGUs
duetolackofavailableresourcesatthenationallevel.
OUTCOME:PROPOSED
INDICATORS
___%increaseinlocalspendingInhealthservicesin70%ofall
provinces,citiesandmunicipalitiesby2016.
____%increaseinlocalspendinginroadinfrastructurein70%
ofallprovinces,citiesandmunicipalitiesby2016.
___%increaseinlocalspendingforotherpublicinfrastructure
in70%ofallprovinces,citiesandmunicipalitiesby2016.
____%increaseinlocaleducationspendinginallprovinces,
cities,andmunicipalitiesby2016.
___%increaseinlocalspendinginallprovinces,citiesand
municipalitiesforenvironmentalprojectsby2016.
___provinces,citiesandmunicipalitiespassingenvironmental
measuresby2016.
___%increaseinspendinginallprovinces,citiesand
municipalitiesforeconomicservicesby2016.
OUTPUTS/SUBOUTPUTS
Increasedresourcesandaccesstofinancingfor
LocalGovernmentUnits.
1.
a.
b.
c.
d.
e.
f.
Efficient,timely,complete,andtransparentreleaseof
intergovernmentalfiscaltransfers IRA,SpecialShares,
PDF,andGrants.
Improvedrevenuesfromlocaltaxesandusercharges.
Increasedrevenuesfromeconomicenterprisesand
othernontaxsources.
Improvedaccesstocreditfinancing.
Improvedaccesstonontraditionalcreditfinancing.
ImprovedaccesstograntsandODA.
OUTPUT1:PROPOSED
INDICATORS
ExecutiveIssuances
Departmentalissuances.
AppropriateLegislation(RepublicAct)
___%increaseinbusinesstaxrevenuesinallprovinces,cities
andmunicipalitiesby2016.
____%increaseinrealpropertytaxrevenuesinallprovinces,
citiesandmunicipalitiesby2016.
___%increaseinrevenuesfromeconomicenterprisesinall
provinces,cities,andmunicipalitiesby2016.
___%increaseinthenumberofprovinces,citiesand
municipalitiesaccessingcreditandnontraditionalcredit
financingby2016.
__%increaseinthenumberofprovincesandmunicipalities
withaccesstograntsandODAby2016.
10
OUTPUTS/SUBOUTPUTS
2. Efficient,effectiveandtransparentplanning,
financial,budgetandexpendituremanagement
Efficientandtransparentfinancialmanagement
andreporting
b. Effective,responsive,transparentandrationalized
planningandbudgeting.
c. Efficientandtransparentexpendituremanagement.
d. Effectiveandtransparentlocalperformance
managementandmonitoring.
a.
11
OUTPUT2:PROPOSED
INDICATORS
ExecutiveIssuances,
AppropriateLegislation.
___%decreaseinCOAcasesby2016.
___%ofallprovinces,citiesandmunicipalitiessubmittingCDPandCLUP
consistentlocalplansby2016.
___%ofallprovinces,cities,andmunicipalitiesplanning,budgetsand
expendituresconsistentby2016.
____%ofallprovinces,citiesandmunicipalitiessubmittingregulardatatothe
LGPMSforatleast3yearsby2016.
___%ofallprovinces,citiesandmunicipalitieswithactivelymaintainedlocal
databasemanagementsystemsforplanningandperformancemonitoring.
___%ofallprovinces,citiesandmunicipalitieswithCBMSby2016.
___%ofallprovinces,citiesandmunicipalitiesconductingannualservice
deliveryperformancesurveysatthebarangaylevelby2016.
12
OUTPUTS/SUBOUTPUTS
3. Efficient,responsiveandaccountablelocal
administration.
Efficient,capacitated,incentivizedand
professionalizedlocalbureaucracy.
b. Efficient,timely,transparent,responsiveand
performancemeasurablebureaucraticprocesses.
a.
13
OUTPUT3:PROPOSED
INDICATORS
ExecutiveIssuances,
___%decreaseincasesfiledbytheOmbudsmanforlocal
executives.
___%ofalltreasurerspassingBLGFcompetencyexamsby
2016.
Assessorsin___%ofprovinces,citiesandmunicipalities
passedaccreditationexamsby2016.
___provinces,citiesandmunicipalitiesimplementingbusiness
friendlymeasures.
___provinces,citiesandmunicipalitiesutilizingservice
deliverycontractsandcustomerservicesurveysby2106.
14
OUTPUTS/SUBOUTPUTS
4. Rationalizedandtimeboundprocessoffiscal
decentralization.
Rationalizedprocessofdevolvingfunctionsand
adequateresourcesandrevenuegeneratingpowers
basedonlocalcapacities.
b. Realistictimetablefordevolvingfunctionsand
resourcestoappropriateLGUlevels.
c. Accuratemonitoringandmeasurementofthe
impactandperformanceofdevolvingfunctions
andresources.
a.
15
OUTPUT4:PROPOSED
INDICATORS
ExecutiveIssuances,
Studiescompleted.
Multisectoralconsultationsconductedandagreements
reachedanddocumented.
__LGUspilottestedforphaseddecentralizationby2016.
16
OUTPUTS
Assumptions
Rolloutofcapacitybuildingistimelyprovidedbyoversight
agencies.
Resourcesareavailableforcapacitybuilding.
ExecutiveandLegislatureissupportiveofpolicyreforms.
Risks
LegislaturemaynotprioritizeLGUreformagenda.
Localizedcalamitiesand/ordisastersmayplaceundueburden
onavailableresourcesforrescueandrehabilitation.
17
INPUTS/ACTIVITIES
y SeeLGULOGFRAMESummaryMatrixfor
detailedinputs/activities.
y TheLOGFRAMEonlyincludespolicy
recommendationsfromthesix(6)ADBTA4778
studiesandthetwo(2)ADBstudiesonLGU
creditfinancingandLGUaccesstoODA.
18
NEXTSTEPS
y DiscusswithCCDmembersforfurthercomments.
y ReviseLOGFRAMEtoincluderecommendationsfrom:
Otherrecentstudies
CCDinitiatives e.g.,AmendmentstotaxprovisionsoftheLocal
GovernmentCodeof1991
InitiativesfromOversightAgencies
InitiativesfromLGULeagues
LGFBR2PolicyMatrix
y Conductconsultationswithotherstakeholdersforcomments
andotherinputs.
y IncludeinnewMTPDPand/orendorsementofCCDtonext
administration.
y LaunchpolicyagendaduringCodes19thAnniversaryasa
preludeto20th Anniversaryin2011.
19
THANKYOU
RaymundC.Fabre 3March2010
20
A Sample Matrix of Issue(s)/Areas of Concern(s), Discussions/Comment(s) and

Agreements/Recommendations
Note: This was culled from a recent USAID workshop proceeding, which was participated in by
more than 200 health project staff. This explains the reference to the province or region
instead of the person/ cooperating agency raising the comments or making the suggestions.
II.
MATRIX OF ISSUES-CONCERNS/DISCUSSIONS/RECOMMENDATIONSAGREEMENTS
The following matrix provides the observations, issues, discussions and agreements/ recommendations on
the island group presentations made on the outputs of Workshop 1 (Identifying Core Problems and Most
Significant Opportunity) as well as the process and outputs for Workshop 2b (Identification of Gaps and
Overlaps of TAs provided by all CAs).
AREA OF CONCERN
DISCUSSIONS
AGREEMENTS/
RECOMMENDATIONS
Workshop 1. Identifying Core Problems and Most Significant Opportunities
Common areas of concern on

workshop 1 output
The identified common LGU input

area is demand generation.
The identified common core
problem is prevalent in CHD.
The common opportunity identified
are the MNCHN grants and PHIC
programs.
Saranganni's FP supply
requirements
In case of Saranganni's FP
supply requirements,
forecasting demand would aid
in ensuring the availability of
needed supplies.
Piecemeal versus integrated

approach to providing services
There is a need to look at the

provision of health services in a
holistic manner. It was noted that
the natural progression of the TA
provided are already leading to an
integrated provision of services.
Exploring the option of sharing

breast milk under EBF indicator
It was mentioned that there are

members of breastfeeding
organizations who are willing to
share their milk with other children.
This can be explored as an option
to improve EBF. However, its
cultural implications should be
taken into consideration (i.e. milk
sharing is considered a sensitive
issue in ARMM).
AREA OF CONCERN
Revising LGU input area (Davao

del Sur)
DISCUSSIONS
There was a query on whether

participants can change their LGU
input area brought about by their
Day 1 CA meeting.
AGREEMENTS/
RECOMMENDATIONS
Due to time constraints,
indicators and LGU input
areas were pre assigned in
workshop 1. However, in the
succeeding workshops, these
would not be limited to just the
assigned LGU input area.
Furthermore, the participants
were reminded that the
workshop does not preclude
further discussions on all input
areas among the various CAs.
Workshop 2b. Identifying Gaps and Overlaps Among the TAs provided by all CAs
On the Workshop 2bProcess
Participants raised that it would be

too tedious to write on the idea
card the TAs that cut across input
areas and indicators.
Points for Convergence per

province
The following were identified as

areas for convergence among CAs
per province (i.e. these were
identified as possible areas for
collaboration for the various CAs):
It was agreed that long idea

cards would be used for TAs
that cut across input areas
and indicators.
Agusan del Norte
Quality Assurance
LAPM
Strategic Planning
Compostela Valley
Compostela Valley
PHIC accreditation
MNCHN
PIPH
CSR+ planning,
implementation and policy
formulation
SDIR
ICV
SDExH
Davao del Sur
AIP and AOP process

NHIP enrollment
Integrating improving Vit A in
CSR+ planning,
formulation
Adoption of TB Linc
technology
Vitamin A in workplace
There is a need to discuss

possible roll out of the
appropriate interventions in
the Family Health Book to
other areas in the province.
AREA OF CONCERN
DISCUSSIONS
AGREEMENTS/
RECOMMENDATIONS
Lanao del Sur
Mass Media
LEC Training
Marawi City
CSR+ planning,
formulation
TA on advocacy on TB
Development of local health
policy/ordinance
DOH-ARMM HNIP (MOA and
Manual of Operation)
AIPH/AOP (EBF)
Strengthening FHSIS (EBF)
Establishment of advisory
bodies (EBF)
Sarangani
ACSM
Generating resources for
PIPH
CSR+ planning,
formulation
MNCHN Strategy
Capacity Building
South Cotabato
Gaps and Duplication of TAs
MNCHN
PIPH
Provision of FP commodities
Changing health seeking
behavior of IP communities
TA on addressing CDR/CR
Agusan del Norte

No duplication of TAs. TA may
seem to be overlapping, but they
are more of a collaboration among
PRISM2, Health Gov, HPDP and
A2Z.
Compostela Valley and
Saranggani
While there is no overlapping
TA on IEC and demand
generation, the need to look
into the details and engage in
further discussions on the
various TAs from the
AREA OF CONCERN
DISCUSSIONS
AGREEMENTS/
RECOMMENDATIONS
perspective of PHO and CHD
was raised. This is to ensure
that overlapping TAs and
areas for collaboration may
further be identified.
Davao del Sur

No duplication of TAs. TA may
seem to be overlapping, but they
are more of a collaboration among
HealthGov, HealthPro, A2Z and
PRISM2.
Lanao del Sur
Lanao del Sur
No overlapping TAs.
Despite the inclusion of necessary
infrastructure and personnel in the
PIPH, these were still identified as
gaps in the province.
Resource generation through

PHIC was suggested to be
included to address the gap.
Maguindanao
Maguindanao
SHIELD and HealthPro are

providing the same technical
assistance in the province in terms
of community mobilization, among
others.
Per HealthPro's COP, they will

have to find a non SHIELD
area in Maguindanao instead
of duplicating TA services
within province.
Marawi City
Duplication of TAs are more on
demand generation in terms of
advocacy and community
mobilization.
Gaps identified were on facilities
and equipments, commodities and
supply for MCH and FP.
Sarangani
No duplication of TAs. TAs on
human resource and demand
generation may seem to overlap
but it should be noted that TAs
provided by CAs such as PRISM2,
HealthPro and HealthGov have
different target groups.
South Cotabato
There is no TA overlap in the
province. It is a convergence site
for the TA efforts of PRISM 2,
AREA OF CONCERN
DISCUSSIONS
HealthGov, HealthPro and A2Z.
On TA's responsiveness to the

core problem in Agusan del
Norte
The core problem identified is

within SBA. Most TAs focus on
CPR and MNCHN strategy which
address the maternal death issue.
AGREEMENTS/
RECOMMENDATIONS
MINUTES OF THE _TH MEETING OF THE

COORDINATING COMMITTEE ON
DECENTRALIZATION
Date of Meeting
Place of Meeting
Preliminaries
1
Call to Order
Attendance
II
Approval of the Previous Minutes of the Meeting
III
Matters Arising from the Previous Minutes of the

Meeting
IV
Highlights of Discussion
Issue(s)/
Area(s) of Concern
Other Matters
VI
Adjournment
Discussion
Agreements/
Recommendations
Department of the Interior and Local

Government-BLGD
05.14.10
DILG Law (RA 6975) provides the Departments

oversight functions over the LGUs; develop their
technical, fiscal and administrative capabilities
Climate Change Act (RA 9729) directs DILG and LGA

to facilitate the development and provision of a training
program on CC, to include socioeconomic,
geophysical, policy .. to address prevailing forecasted
conditions and risks
DRR and Management Act ( HB No. 8985 and SB No.

3086) assigns DILG as vice-chair for Disaster
Preparedness
Background:
TheTAsupportsawiderangeofcapacitybuilding
interventionstocoverinstitutional,technical,
operational,andfinancialtoenablea
comprehensivereformconsistentwithDRRM
Capacitiesaredefinedtocover(a)RIAM,(b)RR,(c)
RFT,(d)EPR;and(e)SR
Background:
Translations of the five pillars will cut
across the four components1) local
structures, 2) local planning process and
outputs, 3) authority levers or tools to
implement the plans and 4) community
mobilization
Implementation Period: June 2010- June
2011
GeneralObjective:
To expand and scale up governments
efforts by focusing on the identification
and implementation of mainstreaming
tools and instruments, following the DILG
frameworkofinterventions
(Tobesystematicallyrolledoutamongthe
localgovernmentsinthecountry)
SpecificObjectives:
To integrate DRRM into physical and multi-sectoral
planning (CLUP and CDP), policy and decisionmaking, prioritization, investment programming and
budgeting, enforcement , monitoring and evaluation;
To support the formulation of a risk finance strategy
that seeks to reduce the financial burden of the
government arising from natural disasters.
The Pilot LGUS:

To undertake the concrete actions arising from the
capacity building interventions: DRRM/CCAresponsive CLUP and CDP
To lead the detailed planning for the sub-projects
that will be implemented in their jurisdictions
(All trainings will be designed as a coaching program for

DILG field officers who will then be responsible in rolling out
with the pilot LGUs)
DILG:MAINSTREAMINGDRM/DRR/CCAINLOCALGOVERNANCE
LocalPlanning
LGU Authority
LocalPlanningProcessandOutputs Levers
Structure
CLUP
Political
Component
Long term
goals
ofphysical
Development
LDC
Deliberates
Laysdown
policies
Takes
decisions
Technical
Component
Sectoraland
Functional
Committees
(Section112,
LGCof1991)
Locational
Principles&
Land/Water
UsePolicies
Vision
Statement
Analysisof
ThePlanning
Environment
CBDRM
Sectoral
Goals
Sectoral
Objectives
&Targets
PPAs
CDP
Monitoringand
Evaluation
(Outputs,Outcomes,
Impacts)
Zoning
Ordinance,
Devt
Regulations
LDIP/
AIP/
Budget
New
Legislation
s
EWS
LGU Equipage
EnvironmentalMgt.
Disaster
Contingency/
ManagementPlan
CLUP/CDP
MITIGATION/
PREVENTION
SafeBuilding
Construction
Livelihood
Housing
Lifelines
Education
Infrastructures
EarlyWarning
Systems
RECOVER/
REHABILITATION
RESPONSE
Searchand
Rescue
Relief
Temporary
Shelter
Stronger operational interface in rescue and

relief efforts among DILG units such as the PNP,
BFP and LGUs
Establishment
of Disaster Risk Management

Offices, Operations Centers
Application of current disaster contingency

measures
Generation, compilation , analysis of

vulnerability indicators (5 devt sectors and
maps)
Capacity build-up of DILG and HLURB trainers
on harmonization of CLUP and CDP preparation
(JMC No. 001, S. 2009)
LGU coaching on preparation of DRM-responsive
CLUPS and CDPs (in select provinces)
Enhancing Compliance/Enforcement of
Policies Impacting on Disaster Risk

Reduction : review existing policies on safe
building regulations
Promoting LGU compliance through periodic
disaster preparedness audit, establishment of

accountability mechanism (analytical tools to
track LGU compliance to ZO, building codes,
etc.)
Facilitating Risk Transfer and Financing
CBDRM- Community Based Disaster Risk

Management
Trainings and application of CommunityBased Disaster Risk Assessment (DRA) for
planning
Improvement of EWS and equipage of
LGUs
Updates
The project was launched through an orientationbriefing (April 30)
DILG program on Climate Change Capacity
Development and Administrative Oversight will
be factored into the processes.
LGUs are required to submit their specific
requests for assistance following the DILG
mainstreaming framework and strategies
Updates
Commitment setting with pilot LGUs in June
Work planning with LGUs (through DILG regions
and provinces) to start in June
Region III Pampanga and

IV-A Laguna
VII Bohol
VIII- Leyte
XIII S. Norte and S. Sur
Zambales
(plus 3 LGUs per province= 21)

Provinces are entry points but
component LGUs are units of analysis
Mainstreaming DRM/DRR/CCA in
Comprehensive Plans
CLUP
CDP
Detailed/ Master Plans

Area/System/Thematic
REGULATORY
MEASURES
Zoning
Other Local
Ordinances
Adm.
Issuance
National Laws
InterJurisdictional
Assessments
Implementation Plan
ELA/LDIP/AIP/CapDev
PROGRAMS
/ PROJECTS
NON-PROJECTS /
SERVICES
LGU Funded
LGU Dept. / office

LCE Detectives
National
legislation
Nat.
Administration
Issuances
NGA Policies
NGA Funded
Joint Funding
Private Sector
Investments
Thank You

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Technical Assistance Consultants Report

Project Number: 39516

Philippines: Local Government Financing and Budget

Prepared by: POYRY IDP Consult, Inc.

Pyry IDP Consult, Inc.

Abbreviations and Acronyms

Asian Development Bank

Municipal Local Government Operations Officers

Introduction and Overview

Issues and Objectives of the Project

Volume 1 Main Report

III. Project Deliverables: Rationale and Performance

III. Project Deliverables: Rationale and Performance

IV. Outcome and Assessment of Project Deliverables

Recommendations for Next Step

VI. Summary of Resources Used:

Component A - Summary of Project Deliverables (As of May 15, 2010):

Finalized CDP Training Modules

Finalized Enhanced Guide to Comprehensive

Guide to Ecological Profiling

Rationalizing the Local Planning System

Study on the Local Planning Database Management System

Local Governance Performance Management System (LGPMS)

Legislative Agenda for the Comprehensive Study on the Status of

ADB TA 7019: Local Government Financing and Budget Reform Project

ADB TA 7019: Local Government Financing and Budget Reform Project

The principal deliverables under Component consist of the following:

ADB TA 7019: Local Government Financing and Budget Reform Project

a. Enhanced Guide to Comprehensive Development Plan Preparation This

Discussions with DBM are expected to yield the following results:

ADB TA 7019: Local Government Financing and Budget Reform Project

The highlights of the Component C accomplishments are the following:

Fully-functioning Coordinating Committee on Devolution (CCD) that meets

Approved medium-term agenda for CCD.

Fully-functioning CCD Technical Secretariat.

Legislation passed on the Executive and LGU League-endorsed tax

Signed Memorandum of Agreements between LGU Leagues and the

ADB TA 7019: Local Government Financing and Budget Reform Project

ADB TA 7019: Local Government Financing and Budget Reform Project

Table 1: Component A Next Steps: Activities and Expected Outputs

Enhanced Guide to CDP Preparation

Style editing to make it more userfriendly.

Harmonization of CLUP and CDP

Formulation of Implementing Rules and

Development and printing of

Development of training modules,

Mainstreaming of Sectoral/ CrossSectoral/Thematic Concerns in the CDP

Manual on Local Planning Database

ADB TA 7019: Local Government Financing and Budget Reform Project

Assessment of system usage by users

Development of a data management plan

Formulation of a system security plan

Development of disaster and recovery plan

Finalization of the LGPMS operational plan

ADB TA 7019: Local Government Financing and Budget Reform Project

Introduction and Overview

ADB TA 7019: Local Government Financing and Budget Reform Project

Issues and Objectives of the Project

Unclear expenditure assignments and overlapping service delivery mandates

ADB TA 7019: Local Government Financing and Budget Reform Project

Lack of completeness, timeliness, and transparency in intergovernmental

Weak governance and systems in public financial management, local

Lack of effective performance measurement system An effective