BUREAU OF LOCAL GOVERNMENT FINANCE2016 Accomplishment

The Bureau of Local Government Finance (BLGF), being the focal agency and authority in local finance, continues to support and advocate policy initiatives that will further enhance local government units’ (LGUs) fiscal management, collection enforcement and financial performance.

For the past year, BLGF’s strategies were focused on continuing good governance reforms through resource mobilization programs, good governance and transparency initiatives, implementation of special projects, enhancement of existing systems, networking and linking with international partners and capacity development programs for BLGF and LGUs.

RESOURCE MOBILIZATION AND REVENUE GENERATION

Local Government Units

Consolidated LGU Financial Performance

The Bureau, through its Revenue Generation Program provides LGUs with technical assistance in implementing tax collection enforcement programs and strategies aimed at improving their performances in generating locally sourced income which includes updating of Local Revenue Codes, Schedule of Market Values, credit financing schemes, improved financial reporting system, among others.

As of 3rd quarter of 2016, local governments’ total revenues reached Php430.89B which is five percent higher than the 2015 – Q3 collection. Of this, Php271.41B or 63% came from external sources which is comprised of internal revenue allotment (IRA), other shares from national tax collections, inter-local transfer and grants/donations, Php144.30B or 34% came from local sources or the tax and non-tax revenues and the Php15.19B or 3% came from loans and borrowings, and other non-income receipts.

Tax revenues and non-tax revenues contributed 25% and 9%, respectively to the total LGU revenues from local sources.

Tax Revenues; 25%

Non-Tax Revenues;

9%

External Sources; 63%

Loans and Borrowings; 2%Other Non-Income Receipts;

1%

Figure 1. Sources of LGU Revenues

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Table 1. Historical LGU Income and Expenditures (In Billion Php)PARTICULARS 2012 2013 2014 2015 2016*

Revenues 376.79 402.45 448.95

533.24 430.89

Local Sources 132.28 135.18 151.36

172.34 144.35

Tax Revenues 92.87 96.33 108.22

122.28 105.42

Non-Tax Revenues 39.41 38.85 43.14 50.06 38.93 External Sources 235.63 254.38 283.3

3 336.92 271.41

Loans and Borrowings 7.80 10.49 8.59 12.75 8.48 Other Non-Income Receipts 1.08 2.40 5.68 11.23 6.64

Expenditures 330.08 349.89 368.13

407.13 274.30

Operating Expenditures 277.97 293.36 300.24

326.01 224.35

Non-operating Expenditures 37.43 41.05 51.14 64.95 39.16 Debt Service (Principal +

Interest) 14.69 15.48 16.75 16.17 10.78

Net Increase/Decrease in Funds 46.70 52.56 80.83 126.12 156.59 Surplus1 53.59 57.55 88.99 129.54 158.89

*As of 3rd Quarter of FY 2016

For the tax revenues, the tax on business and other taxes accounted for the highest contribution at 61% as compared to the 39% shares from real property tax. On the other hand, for the non-tax revenues, fees and charges reported the highest contribution at 52%, followed by income from economic enterprises and other receipts at 39% and 9%, respectively.

Among the LGU types, cities generated the highest total revenues of Php187.03B, followed by municipalities with Php143.71B and provinces with Php100.14B.

Table 2. LGU Revenues by LGU Type (FY 2016 – Q3) in BillionsParticulars Province City MunicipalityLocal Sources 16.87 101.54 25.94 IRA 73.06 73.45 105.89 Other External Sources 4.57 6.84 7.62 Receipts from Loans and Borrowings

3.41 2.99 2.08

Other Non-Income Receipts 2.24 2.22 2.18 Total 100.14 187.03 143.71

Cities are the most self-sufficient with 54% of their revenues coming from local sources (see Figure 2); only 39% were contributed by IRA and the remaining 7% from other revenue sources. Meanwhile, for the provinces and municipalities, the national transfers or IRA have continuously overshadowed the local revenue performance, contributing 73% and 74% of their total revenues, respectively.

1 Surplus (Adjusted for Consolidated Public Sector Financial Position) = Net Increase/Decrease in Funds - Loans and Borrowings + Debt Service

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Through the years, local revenues barely reached a little over 1% of the country’s GDP. However, in 2015, local efforts resulted in 1.06% to GDP ratio. As of FY2016 Q3, the ratio has reached already 1.36% of GDP.

On the current operating expenditures, large percentage LGUs expenses went to General Public Services (54%), followed by Economic Services (18%), Health, Nutrition and Population Control (12%), Social Services and Social Welfare (7%), and other sectors with 9%.

54%

5%

12%

0%

3%

7%

18%

1%

General Public Services Department of Education Health, Nutrition & Population Control Labor & Employment Housing & Community De-velopment Social Services & Social Welfare Economic Services Debt Service (FE) (Interest Expense & Other Charges)

Figure 5. LGUs Expenditure Profile

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Local Sources;

54%

IRA; 39%

Other Ex-ternal

Sources; 4%

Receipts from Loans and Borrow-

ings; 2%

Other Non-Income

Receipts; 1%

Local Sources;

17%

IRA; 73%

Other Ex-ternal

Sources; 5%

Receipts from Loans and Borrow-

ings; 3%

Other Non-Income

Receipts; 2%

Figure 2. Revenue Sources of Provinces Figure 3. Revenue Sources of Cities

Local Sources; 18%

IRA; 74%

Other External Sources; 5%

Receipts from Loans and Borrow-

ings; 1%

Other Non-Income Receipts; 2%

Figure 4. Revenue Sources of Municipalities

GOVERNANCE AND TRANSPARENCY INITIATIVES

Streamlining of Documentary Requirements in the Issuance of Certification of Net Debt Service Ceiling and Borrowing Capacity of LGUs

In line with the President’s inaugural and SONA instruction to streamline government requirements, Department Order No. 54-2016 (25 October 2016) was issued to streamline the certification of Net Debt Service Ceiling and Borrowing Capacity (NDSC BC) of Local Government Units. The Order simplified and reduced the number of documentary requirements from 12 to 4. The Certification is effective up to 1-year and for disaster-stricken LGUs, up to 2-years after issuance. The BLGF has also delegated the review and certification of the completeness of loan documents to the Regional Offices for easier coordination.

For timely and accurate monitoring of LGU loans and borrowings, the Local Treasurer shall submit a Statement of Indebtedness, Payments and Balances (SIPB) setting out the details of each loan as specified, within 10 days after approval of the loan and to update and submit statement on an annual basis.

Number of Certificates of NDSC and BC Issued By LGU Type, FY 2016

LGU Type 2016Number Percent Distribution

City 25 14%Municipality 128 72%Province 14 8%Barangay 10 6%Total 121 100%

Number of Certificates of NDSC and BC Issued By Region, FY 2016

Region 2016Number Percent Distribution

CAR 2 1%CARAGA 7 4%NCR 5 3%Region I 7 4%Region II 9 5%Region III 21 12%Region IV-A 17 10%Region IV-B 8 5%Region V 10 6%Region VI 12 7%Region VII 9 5%Region VIII 20 11%Region IX 10 6%Region X 19 11%Region XI 7 4%Region XII 14 8%Total 177 100%

Source: BLGF, Local Debt Monitoring and Evaluation Division (LDMED) 2016

BLGF Inputs for the SONAPage 4 of 12

Number of Certificates of NDSC and BC Issued By Income Class, FY 2016

Income Class 2016Number Percent Distribution

1st 57 32%2nd 26 15%3rd 27 15%4th 39 22%5th 17 10%6th 1 1%Barangay 10 6%Total 121 100%

Source: BLGF, Local Debt Monitoring and Evaluation Division (LDMED) 2016

SPECIAL PROJECTS

Public Financial Management

Under the EU-funded LGU PFM 2 Project, the DOF thru the BLGF joined the DILG, DBM and NEDA in signing the Joint Memorandum Circular No. 1-2016 setting the framework and policy for a more coordinated approach towards improving local government units’ public financial management in ensuring harmonized and synchronized policies, systems and procedures in planning, budgeting, investment programming, and resource mobilization in coordination in fiscal oversight pursuant to the mandated functions under the Local Government Code (LGC) of 1991.

Environment and Natural Resources Data in the Electronic Statement of Receipts and Expenditures System for Local Treasurers (ENRDMT)

In commitment to promote transparency and good governance in managing the country’s natural resources, the Secretary thru the BLGF issued Department Order 49.2016 (05 September 2016) for the inclusion of Environment and Natural Resources Data in the Electronic Statement of Receipts and Expenditures System for Local Treasurers. The BLGF, in coordination with Philippines Extractive Industries Transparency Initiative (PH-EITI), provided technical and funding support thru the PPEI in the development of Environment and Natural Resources Data

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Management Tool (ENRDMT), a web-based data management tool that captures greater granularity information on:

(1) Direct payments made to LGUs by extractive industries under the national statutes and local tax codes; and

(2) Mandatory and other expenditures coming from LGU receipts/collections from the extractive industries.

The Bureau received the PH-EITI Transparency Award in recognition for significant contribution in the inclusion of ENRDMT data in the eSRE.

Web Presence and Online Services

To prove effectivity of our efforts, the BLGF has been hailed by the ABS-CBN Investigative and Research Group as 1 of the 10 government agencies providing prompt data on digital format for free. Our local and foreign development partners have praised the website as a wealth of information on local fiscal data particularly facts and figures from the eSRE.

http://blgf.gov.ph/blgf-hailed-by-abs-cbn-as-one-of-the-ten-10-government-agencies-providing-prompt-data-on-digital-format-for-free/

Further, in compliance with the government’s directive to improve transparency and good governance in local fiscal and financial management through effective web presence and online services, the Bureau’s enhanced website - www.blgf.gov.ph now includes popular social media link via Facebook. The Facebook page launched during the Bureau’s 29th Anniversary contains all relevant and accurate information to enable local governments, stakeholders and the public to lodge queries and concerns online, access a databank of issuances and news updates.

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CAPACITY DEVELOPMENT FOR LGUs

Continuing Professional Development (CPD) of Local Assessors

The BLGF regularly offers CPD programs accredited by the Professional Regulation Commission (PRC) on: (1) Philippine Valuation Standards (PVS); (2) Basic Course on Mass Appraisal (BCMA) and (3) Skills Development in SMV Updating and Conduct of General Revision. These CPD courses aim to improve the valuation and assessment operation in the LGUs further enhancing knowledge and skills at par with internationally-accepted valuation principles, techniques and applications. Trainings on Philippine Valuation Standards were conducted for Local Assessors.

Capacity Developments for BLGF Central and Regional Personnel

The BLGF conducted Training on Leadership and Management and Training on Facilitation and Presentation Skills, Brown Bag Session on Statistical Analysis and Local Finance, Training on Government Accounting Manual, Writeshop on Administrative Discipline and Non-Disciplinary Proceedings.

The Bureau conducted and initiated forums, seminars, training and refresher course on the following topics:

o PAG-IBIG Mini-Symposiumo GSIS Mini-Symposiumo PhilHealth Mini-Symposiumo TWAD and GAD (in coordination with Legal Service)o Personnel and Document Securityo Orientation Seminar for OJTso GAM Trainingo CY 2016 Mid-Year Assessmento Quarterly Directors Conferenceo Office Productivity (2 Batches)o PHP Programmingo Website Developmento Procurement RA 9184 Workshopo PSA Conventiono Disaster Risk Reduction Management Seminars

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We also participated in NGA sponsored activities, seminars and training and other activities:

o DBM/COA Unified Reporting Systemo Leave Administrative Course for Effectivenesso CSC HR Practitioner Symposiumo Preparation of APPo Updating of R.A. 9184o PBB 2016 Orientationo PAGBA Seminaro CSC Fun Runo Celebration of Elderly Weeko Kalayaan 2016 Fun Runo Rizal Day

Brown Bag Session

In answer to DOF’s Friday Learning Session, the Bureau started the Brown Bag session starting with the celebration of the 27th National Statistics Month in line with the theme “Sustainable Development: Making Statistics Count”. The first Brown Bag Session focused on Statistical Analysis and Local Finance and was held on 20 October 2016. The statistical training was designed for and participated by the BLGF central and regional personnel whose duties and functions require skills in processing and analyzing statistical data. The training covered following topics: (1) Introduction to Statistics; (2) Summary Statistics; (3) Presentation of Data; (4) Steps in Writing a Statistical Report; and (5) Effective Writing and Presentation of Statistical Reports.

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Participants to the 1st Brown Bag Session on Statistical Analysis and Local Finance held last 20 October 2016 at the DOF-BLGF Training Room

Cluster Training for the Provincial Roll-Out of LGU Integrated Financial Tools (LIFT)

The BLGF in cooperation with the Asian Development Bank (ADB) conducted three (3) Cluster Trainings for the Provincial Roll-out of LGU Integrated Financial Tools (LIFT) to Regions II, III, V, VII, VIII and IX in November 2016 at the Bayview Park Hotel, Manila.

LIFT is a web-based system that will serve as a portal to synchronize the financial reporting requirements for the LGUs of the oversight agencies (DILG-NEDA-DBM-DOF). The enhancement and improvement of the computerized fiscal database systems of oversight agencies and of the public financial management e-tools for LGUs was funded by the European Union (EU) through the Support to the Local Government Units for More Effective and Accountable Public Financial Management (LGU PFM 2) Project.

The financial managers of the provinces (Accountant, Budget Officer, Treasurer and Budget Officer) and their focal persons were invited to participate in the training to capacitate them and enhance the skills of the provincial LIFT focal persons in the deployment, use and roll-out of the enhanced and improved computerized fiscal database systems to their cities and municipalities.

Standardized Examination and Assessment for Local Treasury Service

Another important policy issued by the DOF to professionalize the treasurers is Department Order 53.2016 (20 October 2016) establishing and institutionalizing the Standardized Examination and Assessment for Local Treasury Service (SEAL) Program. It promotes the continuous professional development of the local treasury service and to develop a corps of competent and qualified local treasury officials who demonstrate and perform their functions with the highest degree of excellence, integrity, professionalism, and ethical orientation. The SEAL Program is a three-level competency certification program intended to measure the following:

1. SEAL 1 Certification: Tactical-Operational Competencies. This is applicable to all provincial, city and municipal treasurers and assistant treasurers regardless of LGU income classification. This is also open to any interested applicant who intends to join the

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local treasury service and the qualifications set under Section 470 and 471 of the LGC shall not be a requirement in applying for the said examination;

2. SEAL 2 Certification: Strategic-Managerial Competencies. This is primarily intended for local treasurers and assistant treasurers in 1st, 2nd and 3rd Income Class Provinces, Cities and Municipalities. Seal 1 Certification shall be a pre-requisite in taking up SEAL 2; and

3. SEAL 3 Certification: Leading for Innovation Competencies. This is suited for treasurers and assistant treasurers of Special, 1st Class and Highly Urbanized Cities, and 1st Income Class Provinces. This program shall only be open to those certified under SEAL 2;

The SEAL Certification/s shall form part of the criteria in evaluating and selecting recommendees for appointment and designation, and the corresponding weights are given for each level.

COOPERATON AND INTERNATIONAL PARTNERSHIP

Inter-Agency Cooperation

As part of our networking with local and international partners, the Bureau has been sharing the efforts of the government on local governance.

We shared with other national government agencies impact of business tax administration at the National LGU Information and Communication Technology (ICT) Forum. Recently, we offered our expertise at the ARMM LGU Forum to capacitate local treasurers on local fiscal management.

The Department thru the BLGF collaborate on activities relative to Ease of Doing Business in the enhancement of the Business Permits and Licensing System (BPLS) after issuance of DILG-DTI-DICT Joint Memorandum Circular 01 series of 2016 (30 August 2016). The Bureau commits thru the Treasurers and Assistant Treasurers to complement and unify forms, documentary requirements, assessment, processing time in the issuance of business permits and licenses and to ensure that submission of progress and period report will be properly and strictly complied.

The BLGF rendered technical assistance to the MDFO for the Performance Based Grant System (PBGS) under Agrarian Reform Communities Project 2 (ARCP2) covering 41 LGUs.

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At the National LGU Information and Communication Technology (ICT) Forum, OIC Executive Director Niño Raymond B. Alvina discussed Business Application Revenue: Emerging Major Source of Local Income highlighting the progress and impact of business tax administration.

We also strengthened linkage with legislators, stakeholders and development partners to pursue our policy and legislative priorities.

International Cooperation

The ENRDMT has been featured at the Green Fiscal Policy Network Workshop in Thailand wherein we shared country experiences with natural resource revenue, management and governance for the Third Regional Workshop on Financing for Sustainable Development Goals (SDGs): The Role of Fiscal Reforms, Revenue Management and Sovereign Wealth Funds in the Extractives Sector. The event was organized by the UN Environment (UNEP) together with the International Monetary Fund (IMF) and the German Development Cooperation Agency (GIZ), in collaboration with UNDP-UNEP Poverty Environment Initiative Asia-Pacific.

The BLGF participated as a panelist on managing investments in natural resources through the ENRDMT during the PEI Regional Meeting held at Dhaka Bangladesh in June. The objective of the meeting is to showcase to other member countries the tool developed by the Philippines through UNDP funding for monitoring LGU resources and investments on projects focused on poverty reduction initiatives.

At the Asian Public Governance Forum of Local Finance Shared our experiences in achieving fiscal sustainability of local governments was the focus of our participation at the OECD KPC in Incheon, South Korea.

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Officials of the OECD KPC visited BLGF for the co-hosting of the 3rd Asian Public Finance Management Forum on June 2017 to be participated by 30 Local Finance Experts from Asia Pacific countries.

The Department issued Personnel Order No. 446-2016 approved creation of the Project Management Structure for the Mainstreaming Voluntary Guidelines on Governance Tenure (VGGT) funded by Food and Agriculture Organization of the United Nations (UN-FAO), wherein the BLGF is tasked to update the Philippine Valuation Standards.

The Bureau also welcomed visiting Bhutan Officials and shared experiences of inter-government fiscal transfers as part of our efforts to link with the international community.

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